We had a small loan and paid all the payments in the book. (this total was recorded as a liability - loan payable. After the las payment, we were required to pay another "final" payment to satisfy the bank. The liability account was 0 because all the payments were made. When I issued the final check, it credited cash and debited the liability - now I have a debit balance. What would be the journal entry to bring the balance back to 0. Credit loan payable and debit retained earnings?

Thanks
MGreene

Did you find out why the bank required what seems to be an extra payment? I'd want to know why it sounds like you are overpaying the loan.

You don't want to debit RE, though. I think a better choice would be interest expense, but I'd want to make that call to the bank. It could be that they made an error.