Split a Loan Payment Correctly

Record a $1,250 loan payment where the lender statement shows $920 principal, $310 interest, and $20 servicing fee. Split the payment by economic substance: principal reduces liability; interest and fees are expenses. Posting the whole payment to Loan expense makes the P&L too low and leaves the liability too high. Before Bank withdrawal: $1,250. Ledger: $1,250 Loan expense. Loan payable unchanged. After Bank withdrawal: $1,250. Ledger: $920 Loan payable, $310 Interest expense, $20 Bank fees. Step 1 Open the lender statement for the payment date. The statement is the source for principal, interest, and fees; the bank feed only proves…

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