Journal entry-ICD

Can we ( Lender) pass the following entry :-

  1. ICD Receivables -DR to Corporate Debtor-CR (sanction)
  2. Corporate Debtor-DR to Bank -CR (disbursement)
  3. P & L Account -DR to ICD Receivables ( non-recovery).

Our query-whether accounting entry is as per AS and no.3 is okay for taxation purpose ( we want to set off business loss against our business income)

Replies (1)

The accounting entries you've mentioned appear to be related to a lending transaction, where you (the lender) are sanctioning and disbursing a loan to a corporate debtor. Here's a breakdown of the entries: 1. ICD Receivables - DR to Corporate Debtor - CR (sanction) - This entry represents the sanctioning of the loan, where the lender recognizes the receivable from the corporate debtor. 2. Corporate Debtor - DR to Bank - CR (disbursement) - This entry represents the disbursement of the loan, where the lender pays out the funds to the corporate debtor. 3. P&L Account - DR to ICD Receivables (non-recovery) - This entry represents the recognition of a loss on the loan, where the lender provisions for non-recovery of the loan amount. Regarding your queries: - Accounting Standards (AS): The entries seem to be in line with the accounting standards, as they properly recognize the sanctioning, disbursement, and provisioning for non-recovery of the loan. - Taxation purpose: For taxation purposes, the loss on loan (non-recovery) can be set off against business income, as per the Income-tax Act, 1961.

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