Dear Members,
Please if you can answer the below mentioned questions, it would be of great help!!
First Let me explain the situation:
There is a Construction company who took Loan from Bank for financing the purchase of building materials for 2-3 projects at the same time. Each Project has a maximum duration of about 1 year whereas the repayment of bank loan is to be done in three years.
Question:
1. What are the accounting entries that are required to be made when the loan is sanctioned and amount received by the company?
2. Whether the financing charges to be divided for three year period or be expensed out during the particular Project period to the extent of which the amount was utilized?.
3. If some of the loan amount received from bank was utilized to repay the outstanding payable, what would be the accounting entries and where the finance charge proportionate to the amount paid to be charged?
Thanks & best regards,
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Entries for finance chgs on purchases for particular project
Replies (1)
Loan availed would be a term loan and required to be applied only for the expenses related to projects
this money will be received in parts when money is received dr bank account which should be a seperate bank account i.e a no lien account and credit term loan
since the assets are qualifying assets the amount expended is to be capitalised right from inception of project till completion and interest paid after completion of project is to be expensed
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