Accounting For Payday Loans & Cash Advance
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Accounting For Payday Loans – Journal Entries For Payday Loan, Cash Advance & Interest Receivable With Provision For Bad Debts
Payday Loan is a type of cash advance offered to individuals or employees looking for emergency cash to finance short-term needs. It is a convenience way to raise cash as it comes with convenient terms like interest, repayment period etc.
Accounting Entries For PayDay Loan
When you advance a loan to customers, CR your bank account and DR payday loan receivable account with the amount disbursed as a loan. The interest income on the loan should also be accounted for, hence, DR payday loan receivable account and CRinterest income account with the interest portion of the loan.
On receipt of part or outright payment, DR your bank account and CR payday loan receivable account.
There is no business without risk and payday loan advance is not counted out – business owners, based on prudence concept, are advised to provide for a future loss rather than anticipate a profit. You can set aside an amount as “provision for bad debt” in the case of default.
For provision for bad debt, CR your provision for payday loan account and DR your expense account.
Hope you find this accounting for payday loan useful? Read more tips on accounting treatment for business transactions here