Loans

This records longer-term borrowing the business has taken on, separate from day-to-day trade creditors. As a liability it normally carries a credit balance: drawing down a loan increases it (credit) and repayments decrease it (debit).

Real-world examples

Trading company (bank term loan)

A business draws down a £25,000 bank term loan to fund new equipment or working capital. The entry is a credit of £25,000 to 2300 (Loans), increasing the liability, and a debit of £25,000 to 1200 (Bank) as the funds land in the account. No VAT applies — this is a financing transaction, not a supply of goods or services. Monthly capital repayments are then debited to 2300 and credited to 1200 as they're paid; any interest charged is a separate debit to a finance costs code, not to 2300 itself.

Group company (intercompany loan)

In a group with a holding company and one or more trading subsidiaries, it's common for the parent to fund a subsidiary directly rather than the subsidiary borrowing from a bank. The subsidiary's entry looks identical — credit £40,000 to 2300, debit £40,000 to 1200 — but the counterparty is another group company, and the loan is often interest-free or set at a low rate. Beyond that distinction, this code is driven mainly by how a company is financed and owned rather than by what industry it trades in, so the entries don't vary much by sector.

Commonly confused with

Because code 2301 (Directors' Loan Account (Director 1)) sits right next to this one in Long-Term Liabilities, it's a common mis-posting target. Code 2300 is specifically for loans, while 2301 covers directors' loan account (director 1) — similar in nature, but keeping them separate is what makes the long-term liabilities section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Loans misstates what the business owes, and for a Current Liabilities code specifically it can distort the working capital and current ratio that lenders and suppliers look at when assessing short-term financial health.

Other codes in Long-Term Liabilities