Question

Interest Paid on loan taken for Business ₹1000
is a business transaction.​

Answer 1

Answer:

Interest paid on loan

Explanation:

One point must be taken in mind that if someone takes loan for personal purpose, it is not a business transaction and if he amount of loan was utilized for business purpose it is a business transaction.

1. If amount of interest paid is a business transaction, it will be a normal entry as below:-

Interest a/c Dr  Rs. 1000.00

To cash  (if amount of interest paid in cash)

To loan a/c (if amount of interest not paid in cash and credited to loan a/c)

2. If amount of interest paid is a personal transaction, the entry will be as under:-

Capital a/c Dr Rs.1000.00

To cash  Rs.1000.00

because amount of interest on loan taken was paid through the business.

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Answer 2

Answer:

according to your question. direct entry

insurance payment account. Dr. 1000

to bank account. 1000

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