16 April 2019
Dear Experts, Mr. A is proprietor who has taken personal loan in his name however bank has directly credited the loan amount in Firm's current account also the EMI thereof will be debited from firm's current account. My query is:- since the loan is in proprietor Name in books should I credit has capital account and when EMI is debited then we should debit his capital account. Or we should show this amount as secured loan in balance sheet,
16 April 2019
If the loan taken is of personal use and not for the purpose of business then the same should be debited to capital account. The same cannot be shown as loan in balance sheet because it is not related to proprietorship business.
16 April 2019
Loan taken for business purpose can be shown in balance sheet. Since the nature is personal loan thats why the bank have issued in the name of Proprietor but just go through the sanction letter whether name of firm is mentioned and the purpose of use as for business is mentioned. Then the same can be shown in firm's account as Loan. Personal loan in general nature unsecured loan, you may check if it is secured against hypothecation of any asset then you may classify as unsecured loan.
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