Accounting Treatment of Material Taken on Loan Basis
This query is : Resolved
30 May 2008
Hi All,
We are taking Gold on Loan basis from against Bank Guarantee, this loan is to be repaid after a period of 90-180 days. If at the end of financial year, if there is any Loan outstanding what should we do, I mean how to show it? Should we include it our stock books.
Thanks
We are taking Gold on Loan basis from against Bank Guarantee, this loan is to be repaid after a period of 90-180 days. If at the end of financial year, if there is any Loan outstanding what should we do, I mean how to show it? Should we include it our stock books.
Thanks
30 May 2008
sir, question is not clear. why do you want to include loan to stock book and how will you do it?
if u r buying gold by taking loan from bank, simply put that loan in liablity side. if it is bank guarantee at the end of the year, disclose into notes to accounts.
if u r buying gold by taking loan from bank, simply put that loan in liablity side. if it is bank guarantee at the end of the year, disclose into notes to accounts.
30 May 2008
Thank you for your reply Mr. Tygai,
The Gold taken from Bank on Loan basis, is used in production, so at the end of the year the Gold will be either in Raw Material form, WIP or Finished Goods. Since there is no purchasre entry made at the time of taking gold on loan basis. As per my books the stock will be less when compared to my physical stock. I hope now my question is clear. Further should we make any accounting entries when we take Gold on Loan basis.
The Gold taken from Bank on Loan basis, is used in production, so at the end of the year the Gold will be either in Raw Material form, WIP or Finished Goods. Since there is no purchasre entry made at the time of taking gold on loan basis. As per my books the stock will be less when compared to my physical stock. I hope now my question is clear. Further should we make any accounting entries when we take Gold on Loan basis.
30 May 2008
you shud make entry at the time of receipt of loan. it may be as follows :
gold taken on loan dr.(current asset)
to abc bank (current lib.)
or with any other suitable names.
whenever u returned the gold, reverse the entry and debit P&L with charges/interest paid to bank.
but one thing is still not clear, how do u return gold to bank, do u return it to bank after buying same type of gold from market or do u work on that gold for that bank?
if u work on that gold for bank and return it to bank as ur finished goods, u need not to take inventory at year end, it is already there in current asset. and as it is not ur gold, the appreciation of value after processing does not make any difference for ur P&L.
better u write back, how u return that gold to bank, it will be possible to answer more clearly.
gold taken on loan dr.(current asset)
to abc bank (current lib.)
or with any other suitable names.
whenever u returned the gold, reverse the entry and debit P&L with charges/interest paid to bank.
but one thing is still not clear, how do u return gold to bank, do u return it to bank after buying same type of gold from market or do u work on that gold for that bank?
if u work on that gold for bank and return it to bank as ur finished goods, u need not to take inventory at year end, it is already there in current asset. and as it is not ur gold, the appreciation of value after processing does not make any difference for ur P&L.
better u write back, how u return that gold to bank, it will be possible to answer more clearly.
03 June 2008
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