Accounting entry for taking moratiurm for loan

A/c entries 497 views 4 replies

Prashant

Manager-Accounts

28 Points Joined December 2011

Dear Sir/madam,

i have availed vehicle loan from Axis bank and taken moratarium for 6 months as per RBI till August 20. The moratiuram has been availed for 6 months . Now in Sept bank has added interest cost in my principal amount and revised the EMI schedule. details as below.

Loan account balance on 28th feb 20 5.21 lacs

Moratiuram principal+ Interest amount

From March to August end. 1.30 lacs ( This amount added in my earlier principal amount)

New loan account balance on 1st Sept 20 6.51 lacs

Querry :-

Since there is no actual cash inflow in my loan account of Rs 1.30 lacs , how should i increase the loan balance in my books. which will tally with bank statement . Kindly suggest for accounting entry for adding the moratiuram amount of Rs 1.30 lacs in my loan account.

Regards,

Manoj

Replies (4)

yasaswi gomes

My grammar is 💯 good I

7296 Points Joined March 2019

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.

Prashant

Manager-Accounts

28 Points Joined December 2011

Dear Sir/madam,

Read more at: https://www.caclubindia.com/forum/accounting-entry-for-taking-moratiurm-for-loan-558313.asp

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

yasaswi gomes

My grammar is 💯 good I

7296 Points Joined March 2019

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

yasaswi gomes

My grammar is 💯 good I

7296 Points Joined March 2019

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.