A loan repayment split schedule should connect each bank payment to principal, interest and any separately identified charges. The cash instalment alone does not establish the expense for the period. Give the accountant the agreement and lender’s statement before coding every payment to one expense account.

Accounting records, calculator and glasses on a desk
Illustrative photograph by Cht Gsml.

Establish the loan reference

Identify the borrower, lender, currency, account reference and opening balance. Check that the company is the actual borrower. A director’s personal borrowing and a company borrowing should not be merged merely because company cash was used for a payment.

Retain the agreement and later amendments, including rate changes or repayment holidays. An old repayment table may no longer reflect the lender’s current calculation.

Reconcile each component

Use columns for payment date, cash paid, principal, interest, fees and closing balance. Match the lender’s allocation to the bank and accounting entries. Ask about differences instead of forcing the closing liability to match through an unexplained journal.

A principal reduction ordinarily settles the loan balance rather than representing the same kind of item as interest. Let the accountant determine the applicable accounting and tax treatment, including any arrangement-specific issues.

Example: the payment amount stays constant

The bank debits the same amount each month but the lender allocates different amounts to interest and principal. Posting the whole debit as interest would obscure the liability movement. Reconcile the actual allocation and retain the supporting statement.

Close the period with a review

Compare the calculated closing loan balance with the lender’s record and general ledger. Investigate timing differences and unpaid interest separately. Keep tax deductibility and any withholding review distinct from the mechanical payment split; a labelled interest amount is not by itself a tax conclusion.

Related practical guidance

For the surrounding records and responsibilities, see bookkeeping basics, company records to keep, bookkeeping and accounting.

Official guidance: IRAS official guidance.

Help with your company records

For accounting, bookkeeping and related compliance support, contact Raffles Corporate Services at [email protected] or WhatsApp +65 8501 7133. Tell us which records or process need attention so we can discuss the relevant next steps.