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Close loan from director

Asha B , (Student) (11 Points)

13 October 2024

How to pass journal entry to close loan from Directors. Whether to transfer to P&L A/c.

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5047 Points)
Replied 13 October 2024

To close a loan from directors, you'll need to pass a journal entry that repays the loan and updates the company's financial records. Here's a step-by-step guide: 1. *Repay the loan*: The company repays the loan amount to the director(s). 2. *Journal entry*: Debit: Director's Loan Account (or Loan from Directors) [Amount] Credit: Bank/Cash [Amount] This journal entry closes the loan account and reduces the company's liability. 1. *Transfer to P&L A/c*: If the loan was interest-free, you can skip this step. However, if interest was charged on the loan, you'll need to transfer the interest expense to the Profit & Loss (P&L) Account: Debit: Interest Expense [Interest Amount] Credit: Director's Loan Account (or Loan from Directors) [Interest Amount] This journal entry recognizes the interest expense in the P&L Account. 1. *Update financial statements*: Ensure the journal entries are reflected in the company's financial statements, including the Balance Sheet . Additionally, it's essential to ensure that the loan closure and journal entries comply with the company's articles of association, shareholder agreements, and local laws.

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Asha B , (Student) (11 Points)
Replied 13 October 2024

Can we transfer loan to profit and loss account without passing payment entry

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5047 Points)
Replied 14 October 2024

Not in p & l account.you4 can adjust in balance sheet

Asha B , (Student) (11 Points)
Replied 14 October 2024

How to adjust sir. how to pass journal entry

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5047 Points)
Replied 14 October 2024

Debit loan from Directors account and credit capital account

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5047 Points)
Replied 14 October 2024

Debit loan from Directors account and credit capital account

Asha B , (Student) (11 Points)
Replied 14 October 2024

Loan amount is more than capital balance

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