10 August 2017
Respected Sirs, If interest is credited to the Bank Long Term Loan A/c and it is observed that the entire interest has been paid which can be verified from the bank statement, then, will the interest be taken to the balance sheet along with the Bank Long Term Loan? It is obvious that the interest paid will be debited to the P&L A/c but since the interest has been fully paid it should not be credited to the liabilities side of the balance sheet. Kindly correct me if I am wrong. Is there any case law or circular or notification in this regard? If yes, kindly send it to micky_arya@yahoo.com. Thanking you, Dheeraj Arya.
10 August 2017
As on Balance Sheet date you will have to accrue a) Interest Accrued But not due b) Interest Accrued and Due If paid, the interest amount will be debited to Interest Accrued A/c and credited to Bank. So it will not show as a liability No case law required or notification, because this is an accounting concept.
11 August 2017
@Raja PM sir:- The interest paid is for the financial year only. Actually, one CA friend of mine is saying that though the interest has been paid fully for the relevant financial year, still it will be shown under the liabilities side of the balance sheet.
@Anand sir:- Sir, we can create two separate accounts for interest. Interest accrued / paid and Interest accrued / received. One is payable account and the other is receivable. Here we are dealing with interest accrued / paid on Long Term Borrowing from Bank. My CA friend is showing the interest paid under the liabilities side of the balance sheet and also debiting it in the P&L A/c. This is against the accounting principles but he wouldn't listen. If there were any documentary evidence such as a case law or circular, notification or instruction of the Income Tax Department or anything in writing in a reknowned publisher's book, then it would have been of great help. Thank u both anyways for resolving my query.
11 August 2017
In my view.,
Both interest components shown in PandL account and the loan amount (balance) ll be shown in Balance Sheet as Liability / Assets.
But, The conditions of the March month amounts also shown in PandL as Paid/Received and shown in Balance Sheet as Payable/Receivable.....
So, Don't be confused. Every months ends as 30th / 31st we can't receive/paid the payment. Just ll be pay/receive next months 5th to 10th. So, March month amount also in April. The end of the months components ll be shown in Balance Sheet........
The CA exactly correct if he show the March month related Receivable / Payable......
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