Loans are the accumulated amount which is materialized in liabilities side of Balance sheet, it is derived by summing up all the borrowings from banks, financial institutions and other outsiders.

If loan is taken, it is an liability of the proprietor to pay back it with an Interest, that interest is accounted as expenses for the business.

Interest on loan outstanding will always metalized on the debit side of the Profit and Loss account adding it to the apt interest account and on the liability side of the Balance sheet by adding it to the particular loan account.


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