How to account for Loan extended in NBFC

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Nagarajan

CA Final(NEW)

44 Points Posted on 22 September 2010

How to account for Loan extended in nbfc.

Ex: Loan of Rs. 3,00,000/- given for 12 months, EMI - 29246/-

1) Party Account Dr 3,50,952

to Bank 3,00,000

to Unmatured Interest 50,952

When ever EMI received amount will be credited to Party A/c on completion of EMI Party account will be tally.

what ever be the interest accrued will be transferred to Interest received A/c(P&L) on that particular financial year.

(OR)

2) Party Account Dr 3,00,000

to Bank 3,00,000

when ever EMI received amount will be credited to Party account. and on completion of a financial year Interest accrued will be transferred to Interest received account from party account.

if 1st option is correct is it asset value of party is overstated? if 2nd option is correct at any point of time party a/c balance would not be tally with the repayment schedule of loan?

please advice me?

Replies (2)

CA.G.Muguntha Narayanan

Internal Auditor at TVS Motors

1222 Points Posted on 23 September 2010

Suppose Loan is Rs.12L

EMI-110000 (PRINCIPAL-100000), Interest-10000

On sanction:

Party A/c. Dr. 3L

To bank 3L

Each Month Repayement

Bank A/c. Dr 1.1L

To party 1L

To Interest Received .10L

Dinesh Kumar Agarwal

Article clerk

133 Points Posted on 23 September 2010

i agree with Mr. narayanan But for 1 st option i would like to say that asset side is not over stated because an agreement is executed that debtor has to pay such sum on regular intervals and thus obligation is crested on debtors to pay.