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Selected Reading
Calculate provision expenses and write its journal entry
A finance institution has loan portfolio and the respective details are as given below −
| Loan portfolio (%) | 31-12-15 | Rate to calculate (%) |
|---|---|---|
| On schedule |
5286914 |
|
| Loan in arrears | ||
| For first 30 days |
285147 |
2 |
| Next 30 days |
175823 |
22 |
| Next 30 days |
75259 |
22 |
| Next 90 days |
65231 |
53 |
| Next 180 days |
46327 |
100 |
| 360 days up |
25423 |
100 |
Solution
Calculations of provisions are as follows −
| Loan portfolio | 31-12-15 | Rate to calculate (%) | |
|---|---|---|---|
| On schedule |
5286914 |
0 |
0 |
| For first 30 days |
285147 |
2 |
5702.94 |
| Next 30 days |
175823 |
22 |
38681.06 |
| Next 30 days |
75259 |
22 |
16556.98 |
| Next 90 days |
65231 |
53 |
34572.43 |
| Next 180 days |
46327 |
100 |
46327 |
| 360 days up |
25423 |
100 |
25423 |
| Total |
5960124 |
|
167263.41 |
The journal entry for the provision expenses as per the above calculations is as follows −
| Account | Debit | Credit |
|---|---|---|
| Provision expenses Loan loss reserves |
167263.41 |
167263.41 |
Updated on: 2021-07-09T07:28:31+05:30
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