What is the Accounting Treatment for the CAR buy by Company Owner on Loan & Company re-pay the loan?

A, B & C working as director at 'ABC Co Ltd'. Now they buy 3 car 1 for each. Car buy on loan and loan amount will pay by ABC Co Ltd. Now we need to account above entries so guide us.

Replies (1)

Cars are personal assets: Since the cars are bought by the directors for personal use, they are not company assets.

Company Repayemt of loan: When the company repays the loan, it's considered a perquisite (benefit) to the directors.

Tax Implications: The value of the perquisite may be taxable in the hands of the directors.

Accounting entries:

Loan repayment by company: Debit : Director's loan account or perquisite expenses (depending on accounting treatment) Credit: Bank/cash (for loan repayment)

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