Accounting and Bookkeeping

Line of Credit

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

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.