Loan payoff (long term liability)

Posted by Jimmy on March 15, 2007, 3:51 pm

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I just paid off a bank loan early. I wrote a check the same as I did every
month for my regular payments, only this time it was for the full amount
remaining. However, this was not the full amount listed under the Long Term
Liability for the bank note. There is still a sizable chunk left over
(expected interest payment that I won't be making). What is the best way to
clear the liability acount of the balance?

Posted by catrick on March 15, 2007, 4:45 pm

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> I just paid off a bank loan early. I wrote a check the same as I did every

> month for my regular payments, only this time it was for the full amount

> remaining. However, this was not the full amount listed under the Long Term

> Liability for the bank note. There is still a sizable chunk left over

> (expected interest payment that I won't be making). What is the best way to

> clear the liability acount of the balance?

Use a General Journal Entry to: If Loan Liability balance is a credit
balance - debit loan liability and credit loan interest expense. If
Loan Liability is a debit balance then reverse the entry.

Cat

Posted by Allan Martin on March 15, 2007, 5:28 pm

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>I just paid off a bank loan early. I wrote a check the same as I did every

>month for my regular payments, only this time it was for the full amount

>remaining. However, this was not the full amount listed under the Long Term

>Liability for the bank note. There is still a sizable chunk left over

>(expected interest payment that I won't be making). What is the best way to

>clear the liability acount of the balance?

Call up your accountant. If the liability already reflected the interest
then how was this originally entered? Is there some sort of contra or
prepaid interest account set up on the books?

Posted by Jimmy on March 16, 2007, 3:49 pm

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When I took out the loan, I created a Long Term Liability for the vehicle,
and debited that account by the total amount of the loan - principle plus
intrest that I would pay. Since I paid off early, much of that intrest will
not be paid.

>>I just paid off a bank loan early. I wrote a check the same as I did every

>>month for my regular payments, only this time it was for the full amount

>>remaining. However, this was not the full amount listed under the Long

>>Term Liability for the bank note. There is still a sizable chunk left over

>>(expected interest payment that I won't be making). What is the best way

>>to clear the liability acount of the balance?

> Call up your accountant. If the liability already reflected the interest

> then how was this originally entered? Is there some sort of contra or

> prepaid interest account set up on the books?

Posted by Allan Martin on March 16, 2007, 4:41 pm

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> When I took out the loan, I created a Long Term Liability for the vehicle,

> and debited that account by the total amount of the loan - principle plus

> intrest that I would pay. Since I paid off early, much of that intrest

> will not be paid.

Use the money you saved for an professional accountant. Based on your post
you need one.

>>>I just paid off a bank loan early. I wrote a check the same as I did

>>>every month for my regular payments, only this time it was for the full

>>>amount remaining. However, this was not the full amount listed under the

>>>Long Term Liability for the bank note. There is still a sizable chunk

>>>left over (expected interest payment that I won't be making). What is the

>>>best way to clear the liability acount of the balance?

>> Call up your accountant. If the liability already reflected the interest

>> then how was this originally entered? Is there some sort of contra or

>> prepaid interest account set up on the books?

>>>