Repayment of loan

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PRASAD NALLALA (Querist)
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26 November 2013 Sir,
please solve my doubt that what is treatment of repayment loan form bank or borrowing from outside for the purpose of expansion of business or as like additional capital for business and interest thereon

Hitendra Jain

Hitendra Jain (Expert)
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26 November 2013 Any amount borrowed having inherent term of repay is not at all income accordingly its repayment is also not an expenditure.

If repayment term is on-demand then it will shown under current liability and if deferred then up to next one accounting year it will treated as current liability and remaining as long term borrowing under secured or unsecured loan as the case may be.

Interest on loan is generally treated as expenditure and debited to profit and loss account.

But if Interest is related for the period during which business was not commenced, Fixed asset acquired but not installed / put to use then so much amount of interest not treated as expense. Treatment of such Interest is to add in loan amount and account for accordingly.

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