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You are here: IGCSE Accounting Final accounts Revision Notes Final accounts for sole trader

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Final accounts for sole trader

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Article Index
Final accounts for sole trader
Preparing Trading Account
Trading Account - Example
Profit and Loss Account
Balance Sheet
What makes a Balance Sheet?
Trial Balance vs Balance Sheet
Final Account Adjustments
Accrued expenses
Prepaid expenses
Accrued Income
Unearned Income
Interest on Loan
Interest on Drawings
Interest on Loan
Writing of Bad Debts
Provision for doubtful debts
Provision for discount on debtors
Provision for discount on Creditors
All Pages

Interest on Loan

Interest paid on loans taken by the business is treated as expense and will appear on the Debit side of the Profit and loss account.
Sometimes the interest on loan may not be fully paid and may be outstanding when the final account is prepared. In this case, the Interest on loan account will be debited by the outstanding interest amount.

Adjusting Entries


Interest on Loan account Dr.
  Outstanding Interest account  
(Being outstanding interest on loan)  

Accounting treatment

Interest on loan is an expense for the business and appears on the Debit side of the Profit and Loss account.
Interest on loan is a liability for the business and is added to the Loan Account in the Liabilities section of the Balance Sheet.

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