All About Loan You Should Know(2)

June. 11,2020
All About Loan You Should Know(2)

Accounting for loans


1. This course takes into account various customer loans issued by businesses (banks) in accordance with the provisions, including loans by commitment, mortgages, secured loans, credit loans, etc.

Accounting for syndicated loans, trade finance, overdrafts of agreements, overdrafts of credit cards, transfer loans and advances issued by businesses (banks) in accordance with the provisions may also be accounted for separately in the form of "unionized loans," "commercial financing," "overdrafts of agreements," "credit card overdrafts," "transfer loans" and "advances."

The company insured's commitment loan (insurance) can also be set up separately in the account account accounting for the "guaranteed loan" account.


2. This account is accounted for in detail based on the loan category and the customer.


3. the main accounting treatment of loans

When a company lends a loan, it debits the item (main) according to the principal of the loan contract, and the "deposit" account is credited based on the amount actually paid, and the account is debited or credited based on its difference, debit or credit from the current account (transaction fee).

When issuing a syndicated loan, the principal bank and the participating bank determine the principal amount of their respective loans based on the proportion of the syndicated loan.


Treatment of unvalued loans


1. On the interest-bearing date of the unvalued loan, the company calculates the amount of interest receivable based on the principal of the loan contract and the nominal interest rate agreed to in the contract, debit the account "interest receivable," calculate the amount of interest income determined by the amortized cost of the loan and the actual interest rate, credit the account "interest income" , debit or credit the current account (transaction fees) based on its difference, debit or credit the account (discount).

2. When recovering a non-deductible loan, the (main) account is credited based on the amount returned by the customer, debit the account such as "absorbing deposits," credit the account with "interest receivable" based on the amount of interest receivable due, and credit the principal of the returned loan.

If the principal and interest receivable from the loan is fully returned, the transaction fee and the amount of the discount on the loan will be resold, and the balance of that account (transaction fee) is re-debited, debited or credited to the current account (transaction fee), credited or debited to the current account (spillback);


3. Processing depreciation loans

The interest-bearing date of the impairment loan is calculated based on the amortized cost of the loan and the actual interest rate of the specified amount of interest income, debit of the account (spill discount), credit of the "interest income" account and debit or current account credit (compromise) depending on the amount of transaction expense that should be amortized for the current period.

At the same time, the amount of interest receivable determined will be calculated at the principal of the contract and the nominal interest rate agreed in the off-table registration contract.

When recovering a depreciation loan, the principal of the loan and the interest receivable from the loan are recovered in the order of "principal, interest receivable on the table, interest receivable on the table".

The company must reduce the amount of the "interest receivable" account on the balance outside the table based on the amount actually received and the difference between the principal of the loan and the interest receivable in the table, and debit the account "Interests receivable" and credit the current account (discount). Depending on the amount actually received, debit accounts such as "absorbing deposits," credit the account (main), credit the account (main), credit the account "interest expense" based on the customer's repayment.

If the principal and interest receivable from the impairment loan are fully returned, the balance of the loan's discount and transaction costs is re-exported and processed in accordance with the relevant provisions of the unvalued loan.


 4. Treatment of the disability provision

On the balance sheet date, if a company determines the impairment of a loan in accordance with the criteria for recognition and measurement of financial instruments, the account "Loss of depreciation assets" is debited according to the amount of depreciation, and the account "Preparing loan losses" is credited.

If the interest receivable on loans that have been the subject of debt losses is determined in accordance with the criteria for recognition and measurement of financial instruments, the "loss of asset impairment" account is debited according to the amount of the provision for accumulated bad debts, and the "bad debt" account is credited.

For the principal of the loan which is in fact unrecoverable, according to the administrative authority after the approval as a loss of bad debts, the transfer of the principal of the loan, debit "preparation of losses on loans" account, credit of this account (main). According to the administrative authority after approval as a loss of bad debts, the table of resale of interest receivable, debit "preparation of bad debts" account, credit "interest receivable" account. The amount of non-deductible interest receivable outside the table after approval is declared in accordance with the administrative authority, and the amount of the "interest expense" account is reduced outside the table.

At the same time, the amount of transaction fees resold is calculated on the basis of the proportion of the capital of the rea loan exported to the principal of the current loan, the amount of transaction fees to be refinanced or debited into the account (transaction fees), credit or debit on the account - "preparation of loan losses";


5.The processing of re-exported loans

The company recovers the principal of the loan and the interest to be received from the loan of the order "main, interest to be received on the table, interest to be received outside the table".

If the loan is confirmed and resold, then recovered after the loan is recovered based on the principal of the loan recovered, the account (main of the loan) is debited to the account "Preparing loan losses"; Transaction costs that should be transferred are processed in accordance with the relevant provisions of the impairment provisions."

Depending on the amount actually recovered, debit "deposit absorption" and other accounts, credit the account (main), "interest expense" and other accounts.


6. If there is little difference between the actual interest rate of the loan and the nominal interest rate agreed in the contract, interest income can also be determined by calculating the nominal interest rate agreed in the contract.