Calculate provision expenses and write its journal entry

Banking & FinanceFinance ManagementGrowth & Empowerment

A finance institution has loan portfolio and the respective details are as given below −

Loan portfolio (%)31-12-15Rate 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 portfolio31-12-15Rate 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 −

AccountDebitCredit
Provision expenses
    Loan loss reserves
167263.41
167263.41


raja
Published on 08-Jul-2021 07:45:17
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