A re-payment of £15,000 has been posted to XYZ’s loan account, whereas £3,000 of this amount...

A re-payment of £15,000 has been posted to XYZ’s loan account, whereas £3,000 of this amount was paid as interest on the loan. To correct this error the journal entry would require:

	1.	Debit Jerry Blakes loan a/c and credit Interest on loan account with £3,000
	2.	Debit Interest on loan account and credit Jerry Blakes Loan a/c with £3,000
	3.	Debit Cash account and credit Jerry Blakes Loan a/c with £3,000
	4.	Debit Interest on loan account and credit Jerry Blakes loan a/c with £15,000

Expert Solution

Correct journal entry:

2. Debit Interest on loan account and credit Jerry Blakes Loan a/c with £3,000

Reason:

Here Interest is expenditure is paid is wrongly debited to Loan a/c therefore to correct this debit Interest on loan as it is in the nature of expenditure and we have to increase the loan amount by £3,000 so credit Jerry Blakes Loan a/c with £3,000

ekkarill92 answered 3 years ago

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