Long term borrowings Flashcards
1
Q
Explain 2 differences between a bank loan and a bank overdraft.
A
Bank loan
- Shown as a non-current liability in the balance sheet
- Cash is transferred to the business
- Repayment period is more than one year
Bank overdraft
- Shown as a current liability in the balance sheet
- No cash is transferred to the business
- Repayment period is usually within a few months
2
Q
Prepare the journal entries to record a new bank loan.
A
Dr Cash at bank XX
Cr Bank loan XX
3
Q
Prepare the journal entry to record a repayment of bank loan.
A
Dr Bank loan XX
Cr Cash at bank XX
