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Creation liability for interest payable for delayed payment

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Vicky Kumar

13 Points Posted on 29 August 2023

Company A and Company B enters into an agreement to sale a material where Company A is the purchaser and Company be is the Seller. Company B raises debit notes after delivery of materials and as per agreement the payment is to be made within 15 days of debit note date in case payment is not made within 15 days interest at the rate of 12% per annum is applicable from 16th day till the payment is made. But Company B never claimed any interest of delayed payment from Company A. Is it necessary to create liability for interest payment for Comapny A as per accounting rule? Comapny A and Company B has long time business relation and Company B never claimed any interest on delayed payment.

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Quick Summary

This discussion explores whether Company A needs to account for interest payable on delayed payments to Company B, despite Company B never claiming it. The agreement stipulates a 12% annual interest rate for payments made after 15 days. However, due to a long-standing business relationship and a mutual understanding, Company B has not requested interest. The consensus leans towards no provision being necessary, as it appears to be a waived cost based on their business dealings.