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int on loan

sathis (accounts executive) (311 Points)

25 March 2009

Dear Sir,

An a company getting loan from bank or other and make int on loan its come under expenses or current liability.

pls tell me

Thanks & Regards

S sathis kumar

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Riyaz Khan (CA CS (Exec) MBA (Fin) Asst. General Manager-SEBI Internal Auditor-British Certifications Inc.) (1315 Points)
Replied 26 March 2009

If Company incurrs interest on loan, then it depends on the purpose of availing of loan, for example lf company has raised a loan for acquiring or constructing building, then it should be capitalised in the cost of construction. (You may refer the Definition of Qualifying Asset as per AS-16)

Whereas, if the company raises a loan for working capital expansion i.e, Cash Credit Limit, then interest on such CC should be expensed in the P/L Account.

Thanks

-----------CA Rajan Ali, Ambala