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AA-29 Accounting Treatment for Loan Write Off.

884 views 6 replies

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Accounts Officer

717 Points Posted on 21 July 2023

All Respected Members,

Please educate me that if an employer wants to give benefit to an employee by writing off his loan which is payable to firm ? What will be accounting treatment for it.

Please also share journal entry.

Thanks in advance for your precious time and efforts to reply this query.

Replies (6)

NARENDRA

ACCOUNTS MANAGER

2213 Points Posted on 21 July 2023

1) Either credited to him against adjusted in any expenses or

2) Make Cash receipts of that same value & credited to him.

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Accounts Officer

717 Points Posted on 21 July 2023

Dear Narendra Sir,

Thanks for your reply.

unfortunately , I didn't get it can you please elaborate?

NARENDRA

ACCOUNTS MANAGER

2213 Points Posted on 22 July 2023

Though Employer wants to give benefit to the employee against loan , so one should have to write off all his debit balances , we have only 2 choices either make any journal entries & debit to the any expenses like office expenses,factory exp., salary, bonus, or ex gratia kind of or credited him by showing cash receipts or kind of because all n all this is just a book entries .

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Accounts Officer

717 Points Posted on 23 July 2023

Dear Narendra,

Thanks for your elaboration.

Please let me know can we debit it by donation or charity to avoid tax complications because if we debit it by bonus or salary, it Will increase employee salary account which may increase tax liability of employee ?

Yasaswi Gomes new

Finance

4584 Points Posted on 24 July 2023

When company gave loan to employee

Dr. Loan and advances or employee or receivables

Cr. Bank/cash.

When writing off that loan

Dr. Loan write off - income statement

Cr. Loans and advances, employee or receivables

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Accounts Officer

717 Points Posted on 24 July 2023

Dear Yasaawi Gomes,

Thanks for your reply.

Please let me know can we debit it by donation or charity to avoid tax complications because if we debit it by bonus or salary, it Will increase employee salary account which may increase tax liability of employee ?