Loan Amounts due within one year
The Loans module within ExpensePlus allows you to track loans and mortgages that are outstanding, as well as view any capital loan repayments. This article details how to report on loans within ExpensePlus as well as how to update the loan amount due within one year.
In this article:
If you create accounts on a Receipts & Payments basis, loans aren't recorded in the same way. Loan repayments are recorded as expenditure (payments), and the Loans module and the information in this article aren't applicable.
Reporting on loans
When creating accounts on an accruals basis, the total of any loans outstanding are shown on the balance sheet report. This report shows a breakdown of the charity's assets and liabilities.
The balance sheet report displays liabilities (creditors) in two sections:
- amounts due within one year
- amounts due in more than one year
Typically, loans appear within both of these sections, as a proportion of the capital amount of the loan will be repaid within one year, with the remainder due in more than one year.
The Charities SORP (FRS 102) requires the balance sheet to show creditors falling due within one year and creditors falling due after more than one year as separate headings (as it is shown within ExpensePlus). It's a 'presentation split', not something that requires two separate accounts (which is why you will only see one 'Loans' account within the trial balance report.
Entering the Loan Amount due within one year
Where a loan amount due within one year hasn't been set, within the Loans screen:
- Click the edit button to the right of the loan.
- In the pop-up that appears, select the option to 'edit the amount due within one year'.
- To set the 'Amount due within one year' simply click the 'Amount due within one year' box in the table. Then select the period at the top of the popup and edit the amount.
The 'Amount Due within one year' within a period is not the overall amount due within the period specified, but rather the amount due within one year as at any date in the period.
Updating the Loan Amount due within one year
To update the amount due within one year, go to the Loans screen, select the 'edit' button to the right of the loan, then select the option to 'edit the amount due within one year'.
There are 3 common types of loan repayment:
1. Loans where the capital repaid is a fixed amount each month, from when the loan is received
Example: an interest free member loan which is repaid at £500 per month for the duration of the loan.
In this example, the 'Amount Due within one year' will be £6000 (£500 x 12) for the whole duration of the loan repayments (except for the final year of the loan repayment).
In the final year of the loan repayment, the 'Amount Due within one year' will decrease by £500 each month, inline with the outstanding amount of the loan.
If interest is paid as part of each loan repayment (e.g. £50 interest was paid on top of the £500 capital repayment amount each month), then this would not affect how the 'loan due within one year' is set.
2. Loans where the capital repaid is a fixed amount each month, but there is a period of no repayments
Example: an interest free member loan which is repaid at £500 per month for the duration of the loan, but repayments don't start immediately, or are paused for a period during the course of the loan repayment.
In the example:
- Repayments are not starting immediately, the initial 'Amount Due within one year' would be zero (if no repayments were due in the first year).
- The 'Amount Due within one year' will increase by £500 in the 12 months leading up to capital loan repayments commencing, before remaining at £6000 (£500 x 12) from the start of the loan capital being repaid.
- In the final year of the loan repayment, the 'Amount Due within one year' will decrease by £500 each month, inline with the outstanding amount of the loan.
3. Loans with compound interest
Example: A mortgage or bank loan that has compound interest.
These are typically more complicated, because towards the start of the loan, the capital part of the monthly repayment is likely to be low (and the interest part high), but during the course of the loan the capital part of each repayment will gain interest.
You will therefore need to calculate and set the 'Amount Due within one year' according to the loan amount, and interest rate for your loan or mortgage.
Whilst you can update the 'amount due within one year' as the capital repayment amount increases each month (and therefore the amount due within one year increases), you may just wish to set a new amount on the last day of each financial year (as this will ensure your year end accounts are correct).
If you need help with calculating this, you will need to either speak to your bank, your mortgage advisor or your independent examiner.