Accounting entry

187 views 3 replies

Nagarjuna Baabu

Apprentice

35 Points Joined August 2013

Hi, Friends,

Please do suggest accounting entries to be passed in the situation explained below:

Our company has paid interest on loan to Financial Institution (vendor/lender) on 31.03.2020 and we've passed the following entries

01. Interest on loan A/c Dr 10 crs

To Loan from FI (Vendor/Lender) Cr 10 crs

02. Loan from FI (Vendor/Lender) Dr 10 crs

To Bank A/c Cr 10 crs

Later our Subsidiary company requested us to adjust 4 crs out of 10 crs paid on 31.03.2020 towards settlement of over dues payable by Subsidiary company (Installment on Loan from the Same Financial Institution) to avoid becoming NPA ...

We did exactly what our Subsidiary company has requested and FI (Vendor/Lender) has also agreed to adjust 4 crs out of 10 crs paid by Us towards settlement of over dues of subsidiary company...

on 15.04.2020 Subsidiary company transferred the 4 crs to Our company

to close the books on 31.03.2020, what are the necessary entries that I've to pass.. please suggest..

Replies (3)

yasaswi gomes

My grammar is 💯 good I

7296 Points Joined March 2019

What really happens, the substance of the transaction depends upon the software your using i.e., if it allows contra account transaction reversals. Next, if you have paid the money as bank interest, it is non reversible. If the bank had allowed reversal, then reverse the last transaction with just 4 Crores. Then, while lending it to subsidiary, record this as intra group lending. Create a loan given to subsidiary journal if interest component is present, or, create a journal for cash transfer to subsidiary when the substance of the transaction does not fall under loan.