Principal payment from designated fund

I am making a principal loan payment. I am crediting operating account, debiting designated fund. I am creating the journal entry to reduce the long term liability and don't know which account to use to offset, please advise?

Thank you

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Correct Journal Entry for Liabilities
by: Vickey

See the correct way to post a loan payment in "error" number 2 on this page:

If you are using accounting software, you can make sure you are posting it to the right bank/asset account and just split the transaction between the liability account and interest expense account. If the total amount is going straight on the can post it all to the proper liability account.

You can usually assign a "fund" in most accounting software also...but be aware that "fund" assignment is usually just for income/expenses and the amount you paid on the liability may not "deduct" from the fund.

In that case, you could do a journal entry to move that amount from the "designated" fund to the unrestricted fund.

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