Accounting entry for taking moratiurm for loan

This is for company accounts only:

Since you have already recognised a loan

Bank dr (Asset)

Interest dr (expense) 

To Loan liability Cr (non current loan liability)

To payables (current year principle + interest) (current liabilities)

your principle’s is already included in the loan payment. Now that your availing moratorium facility,

you will report accumulated interest expense. The above entry is sophisticated because you don’t have to do anything at all as it will still be under payables (current principle + interest). 

When you don’t have to make a payment, you don’t have to do anything as these balances will be carried to next year.

Dear Sir/ Madam,

I can not debit the bank account as there is no actual inflow or outflow of funds  and if i do the same i will find difference in bank reconciliation .

Can you suggest !

Regards,

Manoj

Hello,

The bank need not be credited because you did not make payments and this system is accruals. For the first year, you can recognise finance costs in the profit and loss as you will avail tax relief on business loans. By the year end or next period, if expenses are outstanding, people convert them and classify them as accrued interest expenses. Here, I used just payables. 

During the bank reconciliation, I don’t believe that is not important here because, there is no recording mismatch or error here. So, ignore BRS and reconcile other transactions on the bank books and cash book. 

What do you mean bank is not debited? Did you not receive the cash into bank account after loan sanction?

Txs

Hi Prashant,

i have posted a question named Amortisation here as per indas and AS and unfortunately no one replied back. You can do normal treatment of amortisation

loan amount/annuity factor for n years for the interest rates gives = principle payment amount.

calculate interest and post them into those entries and carry forward balances. I’ll get back if someone replies to my post. The reason is some loans classify under financial instruments.