Interest and default payability

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amay (Querist)
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10 July 2015 since interest and penalties wetre to be paid due to default done by party.. so why it cant show as debit from capital account.. there is any reasonable justification about showing in debit of P/L ?

CMA Gul S

CMA Gul S (Expert)
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11 July 2015 Hi Amay -

Basic rules of accounting. All expenses need to be either part of P\L or liabilities in case spill over next year.

Interest is paid for the loan\funds taken to run your business and not part of his personal capital. Penalties are for some delayed payments, that is allowable to certain extent s per IT act