India loan management inside a company

[Ajmunnisa]

The company provides loans for its employees. How should be the debit and credits marked when disbursing the money and when receiving the money back from employee.?

 

[DrStrangeLove]

Why would the accounts used be any different than those for a loan to non-employees? Is this company normally in the business of making loans to people?

 

[Ajmunnisa]

this company is a normal company. It provides loan for its employees only. So, journal entries should be marked when disbursing the money to employees and when the employee pays the loan from their salary(cut from salary).

 

[DrStrangeLove]

My point is that it's the structure and mechanics of the loans made that determine the accounts used. For example, if the loan repayment terms make the loan repayments look like a bond (disbursement of funds in a single lump sum, periodic repayment of interest, repayment of the principal at the end of the loan term in a single lump sum), you could use the same accounts as a bond. If the loan repayments are expected to amortize the principal and interest in level payments, you could use the same accounts as a mortgage receivable. Any intermediate accounting textbook should be able to show you the accounts required and journal entries needed for basic types of loans receivable.

The fact that the loans are made to employees isn't all that important to the financial accounting for the loans. It might affect the tax treatment of the loan, and the tax treatment might require additional account, but that's a different problem.