WRONG ANS TO QUESTION BY M SATHISH KUMAR IN EXPT QUERY

A/c entries 2130 views 8 replies

Navin

Audit Assistant

56 Points Joined October 2007

M.SATHISH KUMAR HAS ASKED THIS QUESTION IN EXPERTS QUERY (UNDER TITLE ACCOUNTING TREATMENT DATED 04/05/2008) - THIS IS THE QUESTION

Hello Sir

One of my client taken a loan from ICICI bank Rs 500000/- but they received only Rs.488000 and odd figures. As I inquired about the difference with my client, he said
its a loan processing fee....

tell me whether it is right or wrong... If so, how should i pass entry for the same...

Its urgent please reply asap

Thanks in advance!!!

CA SHAILESH HAS ANSWERED THE QUESTION LIKE THIS WHICH I THINK IS WRONG

It is very simple. Dr loan processing fees/bank charges and credit the amount of Rs. 12000/- to loan a/c

MY ANSWER IS WHICH I THINK IS CORRECT IS -

You cannot credit to loan A/c as that would imply that your loan is reduced by Rs.12000. This is not the case. You still have to pay back Rs. 500000 and not Rs. 480000. The 12000 Rs loan processing is extra. You have to pass a receipt entry for loan

bank A/c
to Loan A/c

and a payment entry for loan processing fee

Loan Processing fee/bank Charges A/c
To Bank A/c

YOU CANNOT SET OFF THE TWO ENTRIES. WHICH IS ABSOLUTELY WRONG.

Replies (8)

CA Anuj Garg

Sr Manager

482 Points Joined July 2007

Dear first go through the basics accounting rules and than try to make comments:

If you credited the loan account wl it reduce the loan amount?

when u didnt recv rs 12000/- , how can u Dr bank account.

and last one just see the the net effect of of ur entries.this is exactly same as mentioned in expert query

even if you hv further any query just let me know .

Navin

Audit Assistant

56 Points Joined October 2007

YEAH RIGHT. CA SHAILESH IS ABSOLUTELY CORRECT. WRONG UNDERSTANDING ON MY PART.

CA. Dashrath Maheshwari

TaXpert

15113 Points Joined September 2007

Dear Navin,

You are right in this case, but you accepted that you are not right...

Never be excited anywhere and in any decision in the life...

This is the lesson from the story, as I learned.

And morever, No one should blame anyone like this in future...

Jeet Biswas

ACMA (in Service)

5073 Points Joined September 2007

and if there is a point of disagreement, the doubt should be placed forward rather than branding an expert's (or anyone else's) advice, outrightly incorrect .

I agree with Maheshwari Sir completely.