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Flashcards in Long term borrowings Deck (3)
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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