Long-term borrowings are amounts a business borrows and repays over more than one financial year, usually from a bank, with interest charged for the use of the money. At each year-end, the part of the loan due within the next financial year is reclassified as the current portion of long-term borrowings (a current liability), while the rest stays as long-term borrowings (a non-current liability).
A bank loan is a fixed amount repaid in instalments (non-current). A bank overdraft is withdrawing more than what the business has in the bank (current). Do not confuse them.
Recording the loan uses ordinary double entry: obtaining it is Dr Cash at bank / Cr Bank loan, and repaying an instalment is Dr Bank loan / Cr Cash at bank. Only the loan amount is recorded in the Bank loan account; the interest is recorded separately. In the ledger the account is Bank loan; in the Statement of Financial Position the same balance is presented as Long-term borrowings.
Interest expense is the cost of borrowing — an expense matched to the period the loan is used (matching theory), recorded when incurred even if unpaid (accrual basis of accounting). The year-end adjustment is Dr Interest expense / Cr Interest expense payable, followed by the closing entry Dr Income summary / Cr Interest expense. G3 students calculate the interest as rate × loan amount × (months used ÷ 12); G2 students are given the figure and record it the same way. The interest expense payable adjustment is reversed on the first day of the next year so the interest is not double-counted.
In the financial statements, the interest expense appears under Less: Other expenses in the Statement of Financial Performance, while the loan splits across the Statement of Financial Position — Long-term borrowings (outstanding − current portion) under non-current liabilities, with the current portion of long-term borrowings and interest expense payable under current liabilities.
To interpret a Bank loan or Interest expense account, read the Particulars column — it names the other account in the entry. In a Bank loan account, "Cash at bank" on the credit side is a loan taken and on the debit side is a repayment; the first entry of the new financial year in an Interest expense account is the reversal of last year's adjustment. The length of an equal-instalment loan is total loan ÷ annual instalment, and forgetting the interest expense payable adjustment understates current liabilities and overstates profit.