Accounting and Bookkeeping
Line of Credit
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Originally Posted: June 6, 2009
Updated:
Feb 04, 2019
If an organization decides to open a line of credit, it does not actually appear on the books of the organization until it is put into use. The line of credit is considered a liability because it is a loan. You will also need to record the amount of interest payable on the line of credit when there is a balance outstanding. The interest payable amount is driven by the borrowing rate on the line of credit.
Below are examples of journal entries showing activity associated with a line of credit.
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