14 August 2009
My friend is running a soleproprietorship concern for the past4 yrs. he has availed OD for the business purpose & housing loan for his aquiring a house. The interest on OD is debited to p&l account under finance charges & interest paid on housing loan is debited to his capital account.However,both the loans are serviced through his business account. What would be the effect on profit/NW of the concern if the interest paid on housing loan is debited to P&l Account? Is it correct to debit the interest on HL to Capital Account?
14 August 2009
Yes. At present you are following the correct treatment. Housing loan interest expenses are of personal nature and hence has to be debited to capital account instead of P&L Account.
CAclubindia
