taken personal loans for the purpose of starting the company

This query is : Resolved

Gajendra R. Tiwari (Querist)
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16 January 2009 If the directors of the Private Limited Company at the time of starting the Company, taken personal loans for the purpose of starting the company. How should it be treated in Accounts of the company?

K V Subba Rao

K V Subba Rao (Expert)
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16 January 2009 As far as Company is concerned, it is immaterial whether Direcors brought in money from out of property inherited from their parents or their own savings or by borrowings.

Money invested in Company has to be treated as Capital

Gajendra R. Tiwari

Gajendra R. Tiwari (Querist)
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29 April 2009 i am total agree with your comments. But i want to know what will be accounting entries in respect of the following :

1) suppose the loan amt introduced as capital is 15,00,000 @ say 15% interest rate and the company is repaying the loan installment, say Rs. 20,000(including interest)

2) can't we take it as loan from directors and not capital introduced?

3) if we take it as loan from directors or capital introduced, how the interest part will be accounted.

4) should interest part be added in the loan amt?

kindly suggest with your precious comments. please mention your answers in accordance with the questions nos.

i will be very helpful if you suggest some other points which you think important.

thanks & regards

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CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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29 March 2012 It will be shown as loan from directors becuase the directors have taken the loan and then given the same to the company as loan.

The instalment shall be bifurcated into principal and interest components.

Entries will be as under:

Bank A/c Dr
To Loan from Director (name of Director)

Loan A/c Dr
Interest A/c Dr
To Bank A/c
(Being loan instalment paid)