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Pre emi entry

Lakshmi (Article) (171 Points)

09 April 2016

HELLO FRIENDS SUPPOSE MR. X HAS TAKEN MORTGAGE LOAN OF RS. 56 LAC & ITS PRE EMI IS RS.16334 THEN HOW TO SHOW PRE EMI ENTRY IN BOOKS OF A/C.

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8 Replies

CA Rakesh Ishi (Working at Private Company) (8202 Points)
Replied 09 April 2016

pre emi is Prepaid Expenses. so I think it's debited against loan account credited

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CA Kumar Mukesh (CA CMA FINAL and Advance Excel Trainer) (6881 Points)
Replied 09 April 2016

Its basically... Charges collected for file processing etc... By lenders... Therefore it should be capitalised.. If it is not part of total loan repayment amt...
Thank you

Lakshmi (Article) (171 Points)
Replied 09 April 2016

THANKS FOR REPLYING..BUT HERE WE HAVE PROSESS CHARGES ALSO AS WELL AS PRE EMI.

PROCESS CHARGES WOULD BE DEBITED IN P&L

PRE EMI WOULD BE CAPITALISED

I THINK SO

CA Kumar Mukesh (CA CMA FINAL and Advance Excel Trainer) (6881 Points)
Replied 09 April 2016

No Lakshmi... Both would be capitalised.. Since. These charges are directly... Associated with... Acquisition of fixed asset..
I think, now you got the criteria... For capitalisation ...

Thank you

Anand Kr Shaw (seeking for jobs) (38 Points)
Replied 09 April 2016

Since Processing fee are generally deducted from loan amount and hence I believe no entry for processsing fee. Only in narration we can write such amount get deducted from loan amount as processing fee. About Pre EMI it should be capitalised.

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sunny (TAXATION) (50 Points)
Replied 09 April 2016

Pre emi is just an Interest component...so interest on loan a/c should be debited

Jasbir Singh (retired Bank Manager) (22 Points)
Replied 10 April 2016

Pre EMI charges appears expenses claimed by bank on account of valuation of property and legal opinion because the loan in question is Property mortgage loan. So in my opinion it should be debited to P &L if paid separately. If EMI is fixed including these expenses then it will be capitalised. Jasbir Singh

Retheesh kumar. V. B (Practice) (71 Points)
Replied 10 April 2016

Pre EMI is to be treated as current asset. Whenever it becomes due interest debited in p&l as expense and adjusted against loan. Expense related to loan debited in p&l