Lesson 9 of 11 · 3 min

Loans and interest

Money borrowed or lent: each repayment split into principal and interest, and the interest built up put into each month's books.

  1. What the loan posted

    Noor Traders borrowed Rs 1,000,000.00 from Meezan Bank on 1 July, at 24% a year, in twelve monthly instalments. Accounts → Loans records it: the money comes into the bank, and what's owed goes under Loans. Money the business lends goes the other way, under Loans given.

  2. What the instalment posted

    On 1 August the bank takes Rs 94,559.60. Rs 20,383.56 of it is interest for July's 31 days, a cost; the rest, Rs 74,176.04, comes off what's owed. Ledger suggests the split, worked day by day; change it to what the bank actually took.
  3. At each month's end some interest has built up that isn't paid yet. Ledger puts it in the books on the month's last day, against Interest owed, and takes it back out the next day. So each month's profit carries exactly the interest that built up in it, and an instalment always posts its interest in full.
  4. A loan linked to KIBOR is repriced as it runs: change the rate from its day, and the interest in every month still open is worked out again (a closed month keeps what it closed with). Each loan's page has its statement: what started it, each repayment, and what's still owed.

Try it

Opens Ledger. You'll be asked to sign in first; new businesses get a free week, no card needed.

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Quick check

2 quick questions. Pick an answer and Ledgy will tell you how you did.

1. The bank took Rs 94,559.60 on 1 August, Rs 20,383.56 of it interest. How much comes off what's owed?
2. Why does Ledger take July's built-up interest back out on 1 August?

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