Qualification > Commerce

Interest on loan

<< < (2/2)

aparna.agrawal1995:
A business taking over another business does not take over it bank. For example, firm X takes over firm Y, if the question mentions that the bank is taken over by firm X then you do the necessary adjustments, otherwise bank is never taken over. It will be a very rare case for firm X to take over firm Y's bank.

aparna.agrawal1995:
You know any question in which interest on partner's loan is credited to the partner's current account? I haven't ever seen it. I'm sorry I don't have an explanation to your question about why interest on loan isn't credited. :/ But, i guess according to the current account format as per accounting standards, we don't include any such thing in the current a/c. The only items entered in the current a/cs are int on drawing, int on capital, drawings, share of profits and salaries.
I'll try to look for an explanation and get back to you as soon as possible but  i'll really sorry for not being able to help you. :(

Alpha:
Interest on loan by a partner is credited to the partner's current account, in case he hasn't yet withdrawn it from profits.
It is usually not accounted for in the Appropriation Account, but treated as an expense in the P & L Acc.

A partner may choose not to withdraw the interest he earns on the loan (for example in case when the partnership is facing liquidity problems). That is why interest on loan is credited to his current account, as he may choose to capitalise it instead of taking it out as drawings, just like in a company, some profits are retained.

http://books.google.mu/books?id=PaL4YA4zrQ8C&pg=PA380&lpg=PA380&dq=why+is+interest+on+loan+credited+to+a+partner%27s+current+account&source=bl&ots=H8KfavMn5j&sig=08cXaNaPHck7HjG7AW6ZMF4HGyM&hl=en&ei=mGm1TpBQxIviBPSa6ewD&sa=X&oi=book_result&ct=result&resnum=7&ved=0CEAQ6AEwBg#v=onepage&q&f=false

cs:
Thank you so much for both of your help :)

Navigation

[0] Message Index

[*] Previous page