Financial expenses accuring

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selim

Manager (Finance)

51 Points Posted on 17 September 2011

Dear Firends,

My MD ask me a question. I really buffled. When a bank sanctions a loan, in 1 st year there is no requirment for loan payment (principal+interest). From 2nd year loan installment (interest+principal) is required to pay. First years interest is accumulated and started to pay back from 2nd year. Bank statement shows all interest/payment from 2nd year.

So, Should I charge 1st year interst in my INCOME STATEMENT of1st year?

THANKS

Replies (3)

Prakash

Chartered Accountant

443 Points Posted on 17 September 2011

Of course you have to Account for the Same in 1St year Income Statement

Accrual Concept Buddy, whether you pay it or not, whether Bank provided it or not in their statement

You have to Account for the Same. You got all information to calculate Interest (Amount Financed, Interest Rate ect)

You are using the funds for doing business naa

As per Matching Concept also you should Match Income with related Expenses naa

selim

Manager (Finance)

51 Points Posted on 17 September 2011

THANKSSSSS

CA ADITYA SHARMA

CA IN PRACTICE

14247 Points Posted on 17 September 2011

Originally posted by : Prakash
	Of course you have to Account for the Same in 1St year Income Statement Accrual Concept Buddy, whether you pay it or not, whether Bank provided it or not in their statement You have to Account for the Same. You got all information to calculate Interest (Amount Financed, Interest Rate ect) You are using the funds for doing business naa As per Matching Concept also you should Match Income with related Expenses naa