ACCOUNT ENTRY

entry will be

Secured loan   A/c  dr              50,000/-

Intrest on loan A/c  dr                5,000/-

To Bank                                                              55,000/-

Secured loan will be opened in the secured loan group, where as intrest on loan in indirect expenses.

vendor A/c Dr 50000

Interest on loan A/c Dr  5000

To Bank A/c    55000

1)      Fixed Asset A/c (Debit) Vendor A/c (Credit) – while acquired asset.

2)      Vendor A/c (Debit) Lender A/c (Credit) – bcoz Banker pay off liability.

3)      Lender / Loan A/c ( 50,000) (Debit)

Interest on loan (5,000) Debit

    To Bank Account (55,000 i.e., EMI)

4)      Loan  reflects in the Balance sheet for Principal Loan Outstanding.

5)      Interest charged to P&L a/c every year as it is an expenditure.

6)      If you by installment from Vendor….  Pradeep entry is correct.

7)      If you buy on hypothecation from Lender….sachin entry is correct.

sory..for 6th point...sachin is correct and for 7th point pradeep is correct.

sir

vandor A/c is open under the head of Secured loan. so, no question arises 4 7 entry

Vendor  should be Sundry Creditor....which falls under Current liabilities.

Lender should be Secured loan....which falls under Term Liabillties.

regards'

Mohan