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Accounting Treatment of Forfeited loan
04-12-2006, 08:30 PM
Post: #1
Accounting Treatment of Forfeited loan
Assume a company apply for short term RF from the bank.Bank facilitates the company Rs.10,000,000 loan against Pledge of Rs.20,000,000 Share Capital.Later on when company has availed the loan is forfeited by the order of the court at that time what would be the accounting treatment of this situation in the both books(In bank& Company).
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04-13-2006, 04:15 AM
Post: #2
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by aaamer123</i>
<br />Assume a company apply for short term RF from the bank.Bank facilitates the company Rs.10,000,000 loan against Pledge of Rs.20,000,000 Share Capital.Later on when company has availed the loan is forfeited by the order of the court at that time what would be the accounting treatment of this situation in the both books(In bank& Company).
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

The company will treat it as its income upon forfieture that is to say

Loan (Dr)
Income Statement (Cr)

The bank will treat it as irrecoverable loan upon forfieture (if it is not recoverable at all) that is to say

Income Statement (Dr)
Loan receivable (Cr)

ICAPians, the unparalleled..
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