This paper introduces a new power flow tracing and subsequently loss allocation method based on loop analysis. The knowledge of the loop paths aids in the visualisation of presumed transfer of power throughout the transmission network. A formalised process of loop identification, based on graph theory, is introduced to ensure that each loop contains at least one active source. This way, the system losses can be readily and justifiably allocated to the active sources in the network without involving any approximations. The proposed method is applied to both a small test system and the IEEE 14-bus test system, demonstrating the features and limitations of the proposed methodology.