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Unsecured Loan

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Himanshu Agarwal

Proprietor

186 Points Posted on 05 March 2021

If the business has provided Unsecured Loan to friends/relatives.
Is it compulsory to charge Interest on that Loan every year?
Or that same amount can be remain outstanding.

Replies (3)

Quick Summary

This discussion clarifies whether businesses must charge interest on unsecured loans provided to friends or relatives. It explains that while loans can remain outstanding, charging interest is a common practice. The thread also touches upon the concept of 'drawings' and how interest on drawings is handled, noting it's only applicable if specified in the partnership deed.

CA. Sourav Sarkar

Chartered Accountant

24588 Points Posted on 05 March 2021

In case of relatives loan can be with or without interest

yasaswi gomes

My grammar is 💯 good I

7306 Points Posted on 05 March 2021

Drawing means cash or goods withdrawn from the business by the proprietor for personal use. It reduces the capital of the proprietor. Interest on drawings will be charged from the partner’s capital account, only if it is mentioned in the partnership deed. If partnership deed is silent, no interest on drawings will be charged. According to the business entity concept interest on drawings will be treated as income for the business and loss for the partners.