long-term borrowings

Question 1

bank loan: repayment period more than one year

Answer 1

bank overdraft: amount overdrawn has to be repaid within one year

Question 2

bank loan: cash is transferred to its bank account

Answer 2

bank overdraft: no cash is transferred to the bank account. the business withdraws more than what it has in the bank account.

Question 3

bank loan: presented as a long-term borrowing under the NCL section of the statement of financial position

Answer 3

bank overdraft: presented as a bank overdraft under the CL section of the statement of financial position

Question 4

journal entries for new bank loan

Answer 4

dr c.a.b
cr bank loan

Question 5

journal entries for repayment of loan

Answer 5

dr bank loan
cr c.a.b

Question 6

journal entries for recording of payment interest

Answer 6

dr interest expense
cr c.a.b

Question 7

journal entries for interest payable

Answer 7

dr interest expense
cr interest payable

Question 8

journal entries for closing

Answer 8

dr income summary
cr interest expense