Para 6.5 — MSO (A&E)
Original Rule Text
6.5 The columns under "Date and Voucher", "Account of Principal of Loan" and "Account of Interest Demand" in the register referred to in the preceding paragraph should be filled in as soon as the transactions are reported from the bank sheet or the Cash Account or the transfer entry for the adjustment of the periodical interest on the Deposits of the Sinking Fund is made. The calculation of interest will be made at the same time. It will be observed that these columns show the interest that will be chargeable on the next periodical day and that the amount of interest deduced from them is not actually debitable against the borrower until the next periodical day.
A loan bears interest for the day of advance, but not for the day of repayment.
What This Means
Entries in the Subsidiary Loan Register — for date, voucher, principal transactions, and interest demand — must be made as soon as the transactions are reported from bank statements, Cash Accounts, or transfer entries. Interest calculation is done simultaneously. The interest figures in the register show what will become chargeable on the next periodical due date, not what is currently due. An important rule: a loan accrues interest for the day it is advanced but not for the day it is repaid.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Register entries must be made promptly when transactions are reported
- 2Sources include bank sheets, Cash Accounts, and transfer entries
- 3Interest calculation is done at the same time as posting
- 4Interest shown in the register is prospective — it becomes due on the next periodical day
- 5A loan bears interest for the day of advance but NOT for the day of repayment
Practical Example
On May 5, the AG learns from the bank sheet that a Rs. 20 lakh loan instalment was advanced to a cooperative society. The Loan Register accountant immediately records this under the principal column with the May 5 date and voucher details, and calculates the additional interest this Rs. 20 lakh will generate from May 5 until the next half-yearly due date (October 16). The interest column shows Rs. 18,740 (163 days at 6%). When the society repays Rs. 5 lakh on June 10, interest is calculated only up to June 9.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why does a loan accrue interest for the day of advance but not repayment?▼
What does 'interest to be demanded on the next periodical day' mean?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.