India begineer debit credit confusion

joy

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May 9, 2012
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hello, i have a confusion regarding debit and credit.

if the transaction is "payed by cash interest of loan taken from smith Rs3000"

here, obviously Cash A/c will be credited but, i am confused whether Smith A/c will be debited or Interest payment A/c.

i am biased towards Interest payment A/c debit cause my understanding is that "Interest payment" is an expense not fulfillment of some obligation to smith, and as interest payment is an expense so, it will be debited.

whereas, if the transaction was" re-payed by cash loan taken from smith Rs3000", then Cash A/c will be credited and Smith A/c will be debited cause the firm has fulfilled its obligation towards smith .

am i right in my understanding? please help!
 

Triest123

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Feb 12, 2012
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hello, i have a confusion regarding debit and credit.

if the transaction is "payed by cash interest of loan taken from smith Rs3000"

here, obviously Cash A/c will be credited but, i am confused whether Smith A/c will be debited or Interest payment A/c.

i am biased towards Interest payment A/c debit cause my understanding is that "Interest payment" is an expense not fulfillment of some obligation to smith, and as interest payment is an expense so, it will be debited.

whereas, if the transaction was" re-payed by cash loan taken from smith Rs3000", then Cash A/c will be credited and Smith A/c will be debited cause the firm has fulfilled its obligation towards smith .

am i right in my understanding? please help!

=> Your concept is right.

From this transaction : "payed by cash interest of loan taken from smith Rs3000",
the company only pay for the interest NOT for the loan repayment.
 
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