Accounting rule...pls help urgent

AS 839 views 2 replies

Renjith S Nair

Accountant

94 Points Joined March 2008

I am working In Maldives..really confused in some transaction nature...pls advice me....

simplifing my question with an example...

question is there are 2 different companies having a same Board of Directors,Company A amd Company B.

Company 'A' is in a good profit .But ,B, is in a loss.

Every month Company 'A' giving money to "B' to meet monthly unsufficient cash for B' monthly expences.

1.My question is How 'B' will treat the financial help from' A' ,ie,like a loan or Income or waht else...

2.If as a loan after a few years 'A' deciding to write off loan given to 'B', how will be Accounting entries in both companies books of accounts...

Thanks in advance..

Renjith S Nair

Replies (2)

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

1. It will be treated as an loan payable to A company

2. If A co decides to write-off the loan balance then the same would be written-back in the books of B Co also & will be treated as indirect income in the P&L. Tax would be accordingly payable on it.

B.SEKAR

manager-accts.

61 Points Joined September 2011

Mr. Nair, I hope you mentioned about Pvt. ltd co. If so, Loan can be given for the normal interest only. If the amount is paid and after wipped off means, Dept people will think that the directors are mobilising the funds. Proper Bond should be excuted stating the rate of interest is 12% to 15% and interest should be attracted by Tax deducted @ source. you can't keepon the loan idle without paying principals and interest. First you should clear with this and aim to get entries. sekar>>>>>bala7123 @ dataone.in.