04-18-2006, 07:16 PM
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..
[/quote]
<font color="red"><b>i think that the treatment of loan will be made under the prudential regulation issued by the state bank of pakistan in the books of account of the bank. it contains the category for nonperforming loan ,rules for the provision against it , n reversal of income as the debt becomes NPL. further the impact of colleteral is also incorporated in it.
further how can a company will will treat loan confiscation(by the way it it novel thing 4 me ) as income when it has plegded the security with the bank ............. bank will sale it out in the open market if the shares are of listed companies to realize the loan recivable .( according to tax laws income can accrued on the liabilty which is remain outstanding for more than 3 years ) but in this case this situation will not arise as the company has given the collateral.bank will file suit or through out of the court settlement will sale the shares and realized its advance.
so a generic entry may be in the books of the company
loan payable xxxxxxxxxxx
investment (shares given as collateral) xxxxxxxxxxx
by the way question is not clear .......... that whether it is to solved as an elemantary level of accounting or in the accounting , banking and legal framework of pakistan as may be required in module e exam.
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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..
[/quote]
<font color="red"><b>i think that the treatment of loan will be made under the prudential regulation issued by the state bank of pakistan in the books of account of the bank. it contains the category for nonperforming loan ,rules for the provision against it , n reversal of income as the debt becomes NPL. further the impact of colleteral is also incorporated in it.
further how can a company will will treat loan confiscation(by the way it it novel thing 4 me ) as income when it has plegded the security with the bank ............. bank will sale it out in the open market if the shares are of listed companies to realize the loan recivable .( according to tax laws income can accrued on the liabilty which is remain outstanding for more than 3 years ) but in this case this situation will not arise as the company has given the collateral.bank will file suit or through out of the court settlement will sale the shares and realized its advance.
so a generic entry may be in the books of the company
loan payable xxxxxxxxxxx
investment (shares given as collateral) xxxxxxxxxxx
by the way question is not clear .......... that whether it is to solved as an elemantary level of accounting or in the accounting , banking and legal framework of pakistan as may be required in module e exam.
</b> </font id="red">
