Can someone tell me the journal entry for car loan for office use?
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The entry for a loan (taken for any purpose) and a car loan are quite different. When you take a bank loan, you’ll receive the money from the bank and subsequently, you’ll start paying interest on it.
In the case of a car loan, you don’t receive the money from the bank. Once the car has been purchased you’ll make the down payment and the remaining amount will be paid by the bank on your behalf. This car loan should then be paid to the bank in installments.
The following journal entry is posted to record the car loan taken for office use:
Car A/c is debited as there is an increase in the asset. Bank A/c is credited as the down payment for the car is made which reduces the assets. Car Loan A/c is credited as it increases liability.
The following entry is recorded for the repayment of the loan (first installment) to the bank.
Let me explain this with an example,
Kumar purchased a car for 25,00,000 for his office use. He made a down payment of 2,00,000 and took a car loan from HDFC Bank for 23,00,000. The following entry will be made to record this transaction.