Term loan

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 July 2014 PLS
can anybody tell me what is term loan and how we do its treatment in accounts, what are the modes of payment of term loan, means its full treatment in accounts.

Sanket Shah

Sanket Shah (Expert)
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25 July 2014 TL is a loan taken for long term with a primary intent of creating some tangible asset and almost against collateral securities. Collateral Security can be offered by applicant or any person associated to the applicant (like director in case of company). The asset you create will become your primary security against which the loand is extended.

Term loan is your liability so you book Cash / Bank Debit against Term Loan from (bank) as Credit. All repayment will constitute TL principal, Interest (as expense) Debit and Cash Credit.

For collateral security from the same books, you inform through Notes to Accounts.

Querist : Anonymous

Querist : Anonymous (Querist)

27 July 2014 can we pay cash against term loan installments.

Sanket Shah

Sanket Shah (Expert)
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05 August 2014 Generally, cash transactions in banking transactions are not permissible. If you had taken private finance then also, I would suggest to go for bank entries as it will yield in tax benefits and avoids violation of any statute.

Normally, banks attach ECS to your account or else payments required through cheque within stipulated time frame as agreed in loan agreement.

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