One time settlement

Priyash,

I think  when the

assets has been ceased

In the books of Borrower,

Loan A/c                         Dr    10 Lacs

Reconstruction Account Dr xxxx------- (Loss on Take over if any)

               To Reconstruction Account Dr   xxxx (Profit on Take Over if any)

               To Assets (Value in books)        xxxx

               To Bank                                          2.5 Lacs

When assets are not ceased,

Loan Ac                         Dr  10 Lacs

                  To Assets                                    2.5 Lacs

                   To Reconstruction Ac               7.5 Lacs (Gain recongnize it in Profit and loss).

Check with others whether the above entry's can be recorded.

Instead of Reconstruction A/c, it is much better to use Profit & Loss Account. 

I agree with Mr Vineet Kumar,since it is ultimately to be taken to P&L a/c.

But further inputs may be taken from our learned collegues,with regard to Income Tax .

kkm

Thank you all for correcting me. 

Regard,

Sriram.V

In fact whether assets are seized or not, loan has been settled. For settlement there is two elements 

1. Interest portion

2. Principal portion

1. Interest Portion:- If the interest has been accrued and entries are passed, necessary entries need to be revized means reversal entries to be passed for interest portion if interest has been recognised as a expenditure. 

2. Principal Portion:- Principal portion gap between loan amount and repayment amount has to be recognized in P&L A/c

Regards,

Praveen Kumar

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