A Cooperative Urban Bank has purchased a property which was mortgaged by a borrower, whose account had become NPA and as no bidders were forth coming despite three auction attempts.
Loan Outstanding - x amount
Unrealised Interest - Y amount
BDDR Provision - X amount
Purchase Value of Property - M amount
Wish to know the proper entries for account the transaction.
In the books of bankrr
Dr. Loans
Cr. Bank
And collateral will be a disclosure.
If defaulted but repossed the asset
Dr. Collateral asset machinery
Cr. Loans and receivables
and then sold for a gain.
Dr. Bank 100
Cr. Gain 50
Cr. Machinery 50
If sold for loss
Dr. Bank 25
Dr. NPA loss 25
Cr. Machinery 50
If thw cost of collateral is 50
Then if the bank has a provision then
When sold for loss
And drecognise the provision
Dr. Bank 25
Dr. Provision 25
Cr. Machinery 50
In the books of bankrr
Dr. Loans
Cr. Bank
And collateral will be a discloaure.
If defaulted but repossed the asset
Dr. Collateral asset
Cr. Loans and receivables
and then sold for a gain.
Dr. Bank 100
Cr. Gain 50
Cr. Machinery 50
If sold for loss
Dr. Bank 25
Dr. NPA loss 25
Cr. Machinery 50
If thw cost of collateral is 50
Then if the bank has a provision then
When sold for loss
And drecognise the provision
Dr. Bank 25
Dr. Provision 25
Cr. Machinery 50
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