Step 1: Obtain the following documents

• Loan Sanction Letter – Once per loan
• Loan Repayment Schedule – Once per loan
• Loan Statement / Balance Confirmation – Quarterly

Step 2: Entry for new loan received

Source documents to refer

• Bank Statement + Loan Sanction Letter

Journal Entry (Receipt Voucher)

• ____ Bank A/c Dr.
• Loan Processing Charges Dr.
• ____ Loan A/c Cr.

Classification of Ledgers

• Bank A/c is to be classified as Cash and Bank balances (group) in current assets (primary group)
• Processing charges are to be classified as other borrowing cost (group) in finance cost (primary group)
• Loan A/c is to be classified as Bank/NBFC/RP/Other Borrowing (group) in Secured/Unsecured Borrowings (group)

Step 3: Entry for EMI

Source documents to refer

• Bank Statement + Loan Repayment Schedule

Journal Entry (Payment Voucher)

• ____ Loan A/c Dr.
• Interest on Loan A/c Dr.
• ____ Bank A/c Cr.

Classification of Ledgers

• Loan A/c classification is as specified in Step 3
• Interest on Loan A/c is to be classified as interest cost (group) in finance cost (primary group)
• Bank A/c classification is as specified in Step 3

Step 5: Additional Entry for EMI (for NBFC loans only)

Source documents to refer

• Income Tax Act, 1961 [TDS Rate @ 10% u/s 194A]

Journal Entry (Journal Voucher)

• TDS Receivable from ____ NBFC Dr.
• TDS Payable on Interest Cr.

Classification of Ledgers

• TDS Receivable is to be classified as Short Term Loans and Advances (group) in Current Assets (primary group)
• TDS Payable on Interest is to be classified as TDS Payable (group) in Statutory Dues (group) in Other current liabilities (group) in Current Liabilities (primary group)