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If the loan is given for short term, then it ll be booked as current liability
If its for Long term, more than one year, then there is very different treatment for it, as provided in IAS39.
The loan shall be booked on discounted value, the rate of interest for discounting shall be the rate applicable for similar loans in the market,
The difference of discounted value and the actual value shall be booked in Profit and loss imediately as interest income, Accountig Entry;
Dr - Long term loan - B/s
Cr - Interest Income on Initial acqusition of loan - P&L
Every year, till maturity, interst shall be charged on the discounted value, such interest shall be added in the Carrying value of the loan, The Entry shall be as under
Dr - Interest Expense - P&L
Cr- Long term loan - B/S
At the end of the loan period, the value of discounted loan ll be equal to the origional loan amount.
The initial interest income booked shall be set off gradually by the interest expense booked in the subsequent periods.
Deferred tax shall also arise at the time of acqusition of the loan.
This is an expense item which is credit bank debit the expense item.
These costs are recorded as a long-term asset on the balance sheet (probably in an Other Assets line).
The costs are then charged to expense over the life of the associated bond, using the straight-line method. Under this amortization method
you charge the same amount of the asset to expense in each period over the life of the bonds.
The full period over which bond issue costs should be charged to expense is from the date of bond issuance to the bond maturity date.
