Track loans, produce amortization schedules, split principal and interest

Enable the worksheet and click New loan

Enable it from Worksheets (Ledger suggests it when a long-term debt account is non-zero). Then, on the Summary tab, click New loan.

Fill in the loan parameters

The “New long-term loan” dialog takes the terms of the contract:

• Account no.: the trial balance account of the loan. The Loan description follows it.
• Lender, Loan type: text.
• Loan date: the disbursement date. The first payment lands one period later (loan on Dec 2, first payment Jan 2), or on that date if Payment at the beginning of the period is checked (step 3). The Maturity date is calculated automatically.
• Original amount, Annual interest rate (%), Total number of payments, Periodic payment: each has a Calculate button.
• Payments per year: 12 (monthly) by default.

Edge cases: lease, demand loan, moratorium, early payoff

• Payment at the beginning of the period (checkbox at the bottom of the dialog): for a capital lease, or a loan whose first payment is made at signing. The first payment falls on the loan date and goes entirely to principal, then one payment per period.
• Residual value: the amount paid at the end of the term (balloon, lease purchase option). Ledger adds it to the last payment, which clears the loan at maturity; with payment at the beginning of the period, it is paid at the end of the term, one period after the last payment. In the fiscal year it falls due, it moves to the current portion. Leave it empty for a loan that fully amortizes. Note: a payment already entered is never recalculated. If it already repays the whole loan, the residual value changes nothing, and Ledger says so in orange under the field: then click Calculate next to the periodic payment.
• Demand loan (checkbox at the bottom of the dialog): for a loan the lender can call at any time. The whole closing balance goes to the current portion (summary, note to the financial statements, balance sheet), as ASPE provides for debt payable on demand. The schedule and the next five years' repayments stay those of the contract, and the loan's row shows “On demand” in the summary.
• Moratorium (collapsed block under the checkboxes): two independent periods, each from … to … (payment dates). Interest-free: no interest, the whole payment goes to principal, so the loan is repaid faster; a moratorium where the bank receives only principal is one. Principal-free: the client pays interest only, and the term is extended by as much (the maturity date moves back). Both at once: no payment during the period.
• Early payoff date (buyout): only if the loan was refinanced or bought out before term. The schedule stops at that date, interest stops after, and Ledger shows “Payoff balance at this date: $X” under the field.

The Calculate button takes the beginning-of-period payment and the residual value into account. The Collateral / notes field keeps any text you want with the loan (for example, the security given).

Enable accrued interest if needed

Checkbox Calculate accrued interest at year-end, at the bottom of the loan dialog. Ledger then calculates the interest accrued from the last payment to the fiscal year-end, prorated by days, and adds it to the adjusting entry (DR Interest / CR Accrued liabilities). For example, a mortgage paid on the 1st of each month has 30 days of accrued interest on December 31.

Choose the Accrued liabilities payable account, which appears under the checkbox. The Interest expense account, higher in the dialog, can stay empty: Ledger detects it (group 808). The calculated amount shows in the summary's Accrued interest column.

Read the Summary and spot differences

The opening balance comes from last year's trial balance (the account's prior-year closing balance in the worksheet, split among the loans when several share the account: see the FAQ). The worksheet balance is the trial balance, including adjusting entries. A green checkmark in Worksheet difference means the schedule's closing balance matches the worksheet balance: the loan is reconciled.

An amber amount means there's a difference. The most common case: the bookkeeping recorded each payment in full against the loan. The difference then equals the year's interest, and the adjusting entry (step 7) corrects it. Otherwise, see “Why doesn't my loan balance exactly with the TB?” below.

Next years button, at the top right of the summary: it adds the principal repayments for the next five fiscal years, then the subsequent years (principal and interest), for the note to the financial statements. Hide next years removes them.

This button only affects the worksheet screen. To remove the next five years' principal repayments from the note to the financial statements (some clients prefer not to show them): in the financial statements' Notes & schedules tab, in the preview, click Hide the next five years, under the table of the Long-term debt note. Once hidden, a box that does not print takes their place in the preview, with Show to bring them back. The choice applies to this file and carries over to the next year's roll-forward. In a review engagement, a warning (not printed) reminds you that ASPE (Section 3856) requires these repayments.

Consult and verify the schedule

On the Schedule tab, pick the loan. Ledger shows the amortization table payment by payment: No., Date, Opening balance, Payment, Principal, Interest, Cumulative interest, Ending balance. At the top: periodic payment, periodic rate, total interest paid, total amount paid.

Everything adds up to the cent. On each row, opening balance − principal = ending balance, and principal + interest = payment; the last payment is the amount actually paid, often a little less than the periodic payment. The summary follows: opening balance − principal repayments = closing balance, interest paid = payments of the year − principal repayments, and the repayments of the next five fiscal years (Next years button) add up to the closing balance.

Use Export Excel at the top for a .xlsx file with one tab per loan.

Submit the adjusting entry

On the Adjusting entry tab, choose the mode at the top:

• Adjust the difference to the books (recommended, selected by default when the loan accounts already have a book balance). Each loan account is brought to the schedule's closing balance; the difference goes to the loan's interest expense. Everything already in the books, bookkeeping and other adjusting entries alike, is taken into account: there is nothing left to reverse by hand. The Accounts affected table shows, for each account, the book balance, the adjustment (debit or credit) and the balance after the entry.
• Full entry. Calculated from the schedule, assuming the bookkeeping charged each full payment to the loan: the year's interest paid is reclassified from the loan to interest expense.

In both modes, accrued interest (if enabled on the loan) is added as is: DR Interest / CR Accrued liabilities. The Proposed entry card lists the lines to post, with a ✓ Balanced badge. Click Submit to adjusting entries: the worksheet confirms “Entry #14 prepared in adjusting entries.”

Once the entry is submitted, a blue banner at the top of the tab says so (“Entry already prepared by this worksheet”, with its number). If the books already agree with the worksheet, the worksheet says so and there is nothing to submit. If you submit again, Ledger offers to replace the existing entry (it keeps its number and receives the full difference) or to keep both (the 2nd entry then contains only the remaining difference).