Unsecured loan or capital

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Querist : Anonymous

Querist : Anonymous (Querist)

07 November 2016 Dear Experts,
Mr. X is proprietor of ABC enterprises and Mr. X has taken loan from Mr. A to clear the dues of vendors however the loan was directly credited in Mr. X's saving account after that Mr. X Has trf the loan amount in ABC's OD Account. Pls tell me the treatment of this loan in the books of ABC enterprises weather it is to be shown as loan i.e.
Bank Dr....
To Mr.A.....

Or it will be capital introduce i.e.
Bank Dr...
To Mr. X capital....

Regards
Sohan Lal

Amol S Joglekar

Amol S Joglekar (Expert)

07 November 2016 The choice is with the proprietor. You need to check the agreement between Mr X and Mr A.....loan is to Mr X as individual OR it is given to ABC enterprises.

Querist : Anonymous

Querist : Anonymous (Querist)

07 November 2016 Sir as the loan was directly credited in in Mr. X's saving account by Mr. A and then it was trf in ABC'S OD account by Mr. X therefore as per my knowledge it will be treated as capital introduce because the loan was not directly creited in OD account.

Amol S Joglekar

Amol S Joglekar (Expert)

07 November 2016 Basically, for all practical purposes, the proprietor and his/her business is considered to be one and same. Treat this as the base of your discussion.
Now, if Mr A is keen in not showing it as loan to business....then show it as capital introduction
If MR A is keen in showing it as loan to business..... then show it as loan.
The choice is to be exercised by Mr A and not by X.

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

07 November 2016 Sir
Mr. A is loan provider and Mr. X is loan receiver hence Mr. A cannot be criteria to decide weather Mr. X will
treat this loan as loan or will introduce his capital?

However proprietor want to show this amout as loan in ABC enterprises
But the problem is ABC enterprises has received the loan from proprietor's saving account not directly from Mr. A'S account. Pls tell me in this case can i show this loan from Mr. A in the books of ABC enterprises i.e.
Bank Dr....
To A'S loan a/c....

Is it correct treatment

Amol S Joglekar

Amol S Joglekar (Expert)

07 November 2016 Please note the Creditor can very well impose conditions. Your very argument on the basis of loan provider and loan receiver suggests your practical inexperience. Anyway that is not our problem area, so just leave it.
Now the entry given by you is absolutely correct viz.
Debit Bank OD a/c
Credit Mr. A's Loan a/c
(Write in the narration that how the money is received through savings account etc etc etc. Ok?)

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