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