If loan taken by a company has been classified as NPA in the books of Bank then no interest is charged thereon as per Prudential Guidelines unless it is realied. But in the books of borrower, provision is to be taken for interest element as the same is payable to bank. We will debit Interest a/c but which accountig head will be credited? Please clear in light with Accounting Standards.
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Accounting entry
Replies (2)
sir for bank he is npa but from borrower point of you how does it make any difference ??
This query is relating to ind as 1, I presume.. so the main issue here is whether to classify the interest liability as current or non current in balance sheet..if bank has classified your loan as NPA... and it is demanding repayment of whole loan amount then classify the loan as current irrespective of its tenure..but if bank has agreed after balance sheet date but before date of approval of fs,not to demand immediate payment.. continue its classification as per the tenure..
Plus accounting entries can be done in usual ways ..creating provision for interest..though its obvious u ll not get deduction unless paid
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