Jishnu Surendran (Finance Manager) (312 Points)
08 April 2013Guys....fixed asset purchased.....USD 100000... @ 45
Foreign Loan USD 100000... @ 45 for purchase...interest rate...6% 5 years...principal repayment USD 20000 per year
Indian interest rate 10 %........
Applying AS 11 and AS 30....can any tell me the entries....I mean...the interest cost that we need to account is at the rate of 10 % but what we pay is only 6 %.....
journal entries ?.....help...my another query on Fixed Asset is still left untouched......
CMA Shilpa Shinde
(COST ACCOUNTANT)
(217 Points)
Replied 10 April 2013
It Seems your Qtn not properly framed.
Is it FCNRB Converted Loan?
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 10 April 2013
I do not know what is FCNRB Loan. But does that make any difference ?
Just want to know this much.....
An establishment that is required to report items in INR....borrows money in foreign currency...say @ 10%.....if the interest rate prevailing in India is 15 %.......what are the journal entries..?
For instance Loan USD 100000 @ 45 on 31/03/2012 principal equally payable over 5 years...
Interest @ 10 %...Indian rate 15 %......
Payment on 31/03/2013 @ 47....then journal entries.....
CMA Shilpa Shinde
(COST ACCOUNTANT)
(217 Points)
Replied 10 April 2013
Have you checked Bank Statement from where loan taken. and related loan documents.
Where loan amount credited.
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 10 April 2013
CMA Shilpa Shinde
(COST ACCOUNTANT)
(217 Points)
Replied 10 April 2013
Dear Jishnu Surendran,
Ref. Link https://220.227.161.86/322asi_accstand10.pdf
Example on pg.703 of link. Earlier reply was part of verfication.
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 10 April 2013
thank you Shilpa.... but I know the calculation and treatment...not aware of the journal entries.....
CMA Shilpa Shinde
(COST ACCOUNTANT)
(217 Points)
Replied 11 April 2013
Dear Jishnu Surendra,
Based on Example given in link:
Accounting Entries
1) When Loan Borrowed
Bank A/c Dr- 10000x45
To Loan Payable A/c 10000x45
2) When Interest Accrued as forms part of Borrowing Cost
Interest on Loan 49500
To Loan Payble 49500
3) When Loan 1st Installment with Interest amount paid
Loan Payable --- (Including amount of interest @ related exchange rate)
To Bank
4) To Transfer Exchange gain /Loss
Assumed gain
Gain on Exchange Rate Diff
To P&L A./c
(Entry -4-to be confirmed - as per -AS-11- to form part of Borrowing Cost or not).
5) If Loan is in relation to purchase of Fixed Asset, Interest to be Capitalized
Specific Fixed Asset - Dr.
To Interest on Loan Cr.
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 11 April 2013
Shilpa...check journal entry 2
Interest on Loan 49,500
to Loan Payable 49500
the rate you applied...please....
CMA Shilpa Shinde
(COST ACCOUNTANT)
(217 Points)
Replied 11 April 2013
as per u any another Figure ?
Jishnu Surendran
(Finance Manager)
(312 Points)
Replied 12 April 2013
just tell me this Shilpa....Foreign Loan USD 100 @ 10 %..rate 40....Indian interest rate 15 %....just assume same exchange rate the year end......
so the entries
Bank 4,000
To Foreign Loan 4,000
for interest payable...........
Interest
To Foreign Loan
what is the amount of interest booked....?
CAclubindia
