Loans, Hire Purchase & Mortgages: Codes 2300, 2310 & 2330

Borrowing that will take more than a year to pay off is treated differently from everyday trade credit — it sits in its own Long-Term Liabilities section of the balance sheet, split by the type of borrowing.

The codes, and what each one holds

Code 2300 — Loans records general long-term borrowing, such as a bank loan taken out to fund expansion or working capital.

Code 2310 — Hire Purchase records the outstanding balance owed on assets being bought under a hire purchase agreement, where the asset itself is already shown in Fixed Assets.

Code 2330 — Mortgages records borrowing secured against a property the business owns. All three are Long-Term Liabilities codes and normally carry a credit balance.

A worked example

Say a business takes out a £15,000 bank loan to fund new equipment, and separately buys a delivery van worth £18,000 on a four-year hire purchase agreement with nothing paid up front.

Loans (code 2300): £15,000 credited when the loan is drawn down, with £15,000 debited to the bank account.

Hire Purchase (code 2310): £18,000 credited when the agreement starts, matched by the £18,000 van being added to Motor Vehicles (code 0050) in Fixed Assets.

Both balances reduce (debit) gradually as monthly repayments are made.

Why this matters day to day

Separating long-term borrowing from short-term trade creditors gives a much clearer picture of the business's financial structure — a bank or investor looking at the balance sheet wants to know how much debt is due soon versus stretched over several years. Keeping loans, hire purchase and mortgages in separate codes also makes it far easier to check each one against its own repayment schedule.