LOAN TAKEN FROM INDIVIDUAL

 No, but if that individual wants to reimburse his interest  from the firm, he can.............

Who is that individual...??

Is that interest loan or interest free loan...??

Have more questions. So, ask Your query with details 

Originally posted by : SOURAV SAMANTA
	IN GENERAL VIEW, "NO ISSUES".   What happens If individual is outsider ? Then Interest can be pay for the loan received from outsider.    What happens if individual has relationship with firm like he or she partner? Then It's as per Deed.   Also what happens if interest individual give money with interest or interest free ? If Interest free the no questions. If it's Interest loan then it will be pay as per agreement if loan taken interest basis.   There is not mentioned anything about loan in partnership deed.

The interest is charged by bank against personal loan...

It's that individual's liability, not for Firm.

Originally posted by : SOURAV SAMANTA
	Thank you sir

You are welcome...

No, the firm cannot debit the interest part of the loan as an expense in the profit and loss account in this scenario.

Here's why:

• The interest expense is incurred by the individual who took the loan from the bank. It's a cost of financing their investment in the partnership firm.
• The funds borrowed by the individual and invested in the firm become part of the firm's capital. The firm itself isn't incurring any debt or interest charges on this investment.

The firm will only record the interest expense as a cost if they themselves take out a loan and use the funds for business purposes. In that case, the interest becomes a financing cost for the firm's operations and is appropriately reflected in the profit and loss statement.

Here's a breakdown of the accounting treatment:

• Individual's books:
  • The loan principal will be shown as a liability.
  • The interest payments will be recorded as an expense.
• Partnership firm's books:
  • The investment from the individual will be recorded as a capital contribution.
  • There won't be any entry for the loan or its interest since the firm isn't directly involved.

I hope this clarifies!