Accounting for Loans

This paper is made to fulfill Akuntansi Bank dan LPD Task

Lecture: : Prof. Dr. I Wayan Suartana, S.E., M.Si., Ak.

By:

Putu Shandya Maharani 1506305117

Putu Desy Pirdayanti 1506305125
Greafi Glenn 1506305161

Accounting Major
Faculty of Economic and Business
Udayana University

BALI
2017
 Accounting for Loans
Loans extended by banks may be defined as provision of money or equivalent claims based on
loan agreements between banks and others requiring borrowers to repay their debts after a certain
period of time with interest or profit share. The Bank may grant credits if it has the same funds as
that, the bank is involved in an agreement with the prospective debtor whether the volume,
interest rate, term and collateral. For credit approval banks an irrevocable commitment is
likewise to the debtor. Besides, after the credit disbursed, the bank always has to monitor the
credit quality. The longer the credit period is generally the greater the risk.
A. Types of loans
1. Types of Loans by Form.
- Bank Statement
In this case the debtor is granted the right to withdraw funds from their bank account
up to the ceiling that set by the Bank. The principal repayment is due at maturity. The
interest on loans generally calculated on a daily basis based on the outstanding credit
or with the average value of the outstanding balance per month.
- Installment Loans
It is a credit that the principal installment of the interest is done regularly according to
the agreed time schedule between the bank and the debtor, with a constant value
during the crediting period.
2. Types of Loans by Time Period
- Short terms loans
Loans with the time period less than 1 year.
- Medium terms loans
Loans with the time period between 1 and 3 years.
- Long terms loans
Loans with time period more than 3 years.
3. Types of Loans by usability
- Working Capital Loan
This loan is provided to working capital.
- Investment Loan
 Loan provided to investment, for example to build a factory, and to prepare another
infrastructure.
- Personal Loan
This loan is provided to personal consumption. For example, loans for buying car.
B. Interest Loan
Before registering loan transactions, we should understand the calculation of interest on
loan, because with the calculation of interest loan can sort out the principal installment
with interest installment. These two things have different accounting treatments:
1. Effective Rate.
Effective rate is performed at each regular interval of the same amount or fixed called
an annuity. With this method the nominal interest installment for each period or
month will decrease, while the principal installment will increase.
a) Payments of annuity at the end of each installment period (Postnumerando)
Loans with numerando post installments are generally for cash credits, its mean
that the realized loans are in the form of money. For example working capital
loans, investment loans. Annuities are calculated by the formula:
A = M X i/1-(1+i)n
Explanation:
A = Annuity
M = Loans value
i = Interest Rate
n = Time Period of Loans
b) Loans installment received for each beginning of the month (prenumerando)
Banks also provide non-cash loans such as car loans. These types of loans and
other financing institutions will use the effective interest with the installment of
prenumerando (the beginning of the month). To determine monthly installments
when credit is payable at the beginning of each month will use the formula:
A= M
1 (1 + I)-n+1/l+1
Explanation:
A = Annuity
 M = Loans value
I = Interest Rate
n = Time Period

2. Sliding Rate
The principal installment is calculated to be fixed or equal to each installment. While
interest calculated decreases in line with reduced credit remaining so the total
principal installment and interest is decreased during the installment period. The
formula for calculating the principal installment is:
A = M/N
Explanation:
A = Principal installment.
M = Ceiling of Loan
N = Period of Loan
To determine installment of interest we can calculate as follows:
b1= M*i
b2= (M-a)*i
b3=(M-(a*2))*i
b4=(M-(a*3))*i
So, bn = (M-(a*(n-1)))*i
Example:
Purchase of a house with KPR btn facilities. The price of house is Rp. 700.000.000, title transfer
tax (bea balik nama) and another cost is Rp. 15.000.000. Costumer have to paid the down
payment with amount of Rp. 100.000.000, title transfer tax, and the initial installment. So, the
valu of KPR is Rp. 600.000.000. And the question is how many montly installments if the
customer takes a 3-year KPR period with 24% interest.
Solutions:
Initial Installment (a) = 600.000.000/36
=16.666.666,67
Interest Installment 1 = 600.000.000*0,02
=12.000.000
 Interest Installment 2 = (600.000.000-16.666.666,67)*0,02
= 11.666.666,67
Interest Installment 3 = (600.000.000-(16.666.666,67*2))*0,02
=11.333.333,33
Interest Installment 4 = and so on
So, the total initial installment and the monthly interest are:
Initial installment and interest 1 = Rp16.666.666,67+12.000.000
= Rp 28.666.666,67
Initial installment and interest 2 = Rp 16.666.666,67+11.666.666,67
= Rp 28.333.333,33
Initial installment and interest 3 = Rp 16.666.666,67+.
So, the total installment with the sliding rate approach is decrease along the loans
period.
3. Flat Rate
Interest rate calculation with flat rate is based on prorate interest calculated that
appropriate with loan period and loan nominations. Thus to determine the installment
of principal and interest in very simple way. The practice in a bank when using a flat
rate will generally determine a lower interest rate than using an effective rate or
sliding rate. Why is that because when determining the same interest rate as sliding or
effective rate then the total installment becomes very expensive. The formula for
determining the installment of principal and interest is
Initial installment and Interest = M+(M*i*t)/N
Explaination:
M = plafon kredit
I = Interest Rate
T = Time Period of Loan
N = the amount of monthly installment on loans period.
From the example above, so the total installment per month
Initial installment and interest = Rp600.000.000 + (600.000.000*24%*3)/36
= 28.666.666,67
 The amount of initial installment per months = Rp. 600.000.000 : 36 = Rp. 16.666.666,67
and initial installment per month with the amount (Rp. 600.000.000 x 24% x 3)/36 = Rp.
12.000.000 per month that paid for 36 months.

4. Conversion of Flat Interest to Effective Interest

Formula:
Effective interest rate = 2ni/n+1
Where,
n = installment period
i = flat interest rate

C. Accounting for Loans

In accordance with the definition of loan is the provision of money under the
agreement, this means the need for akad kredit or credit agreement. This credit agreement
will bind banks and debtors. Loan commitments are off balance transactions, ie
transactions that have not affected the balance sheet or profit or potential loss to influence
it when the commitment is being realization. When loan commitments are fulfill or the
bank makes a dropout of funds, then the commitment has actually been effective. Thus,
all such loans commitments account must be deleted or credited to the value realized.
Accounting for debtor includes several recording procedures which include: approval
of creditors, withdrawal of checks by debtor customers, debtor interest charges to debtor
customers, principal repayment, wages of interest payments by debtor customers, and
debtor valuation on the balance sheet. Especially for the recording of debtor interest, can
be done either on cash basis or accrual basis.
Example:
On 25 April 2012, Anita applied loans to Bank Mitra Niaga Semarang with the amount of
Rp. 50.000.000. This application for loans, approved on 1 May 2012. If within 5 years,
the interest 20%, fees and commissions 0.25%, stamp duty Rp. 10.000, Notary and PPAT
fee Rp. 300.000, credit insurance fee Rp. 10.000, interest with sliding rate. At the same
time disbursed credit, transferred to branch Prabumulih Rp.20 million and credited to the
account Anita Rp.20 million and the rest in cash.
Date Account Debit (Rp) Credit (Rp)
May 1 2012 Credit Provided 50.000.000
RAK Cirebon 20.000.000
Branch
Anita Firdaus Giro 20.000.000
Provisions and Fees 250.000
Stamp Duty 10.000
Notary Current Account 300.000
Administration Fees 100.000
Inventory 5.000
Loan Insurance Premium 100.000
Cash 9.235.000
June 1 2012 Anita Firdaus Giro 1.833.333,33
Credit Receivable 833.333,33
Interest Loan Revenue 1.000.000
July 1 2012 Anita Firdaus Giro 1.831.666,66
Credit Receivable 833.333,33
Interest Loan Revenue 998.333,33

D. ACCOUNTING TREATMENT OF INTEREST LOAN

The accounting treatment of loan interest depends on loan quality, if the bank's
current loan can apply basic accrual. This means that the bank can record interest income
at the time of reporting. Unrecognized interest is recorded as interest receivable.
However, for non-performing loans, then interest income is treated as cash basic. Thus
the unpaid interest income of the debtor, recorded in the administrative account
(contingent of the bill).
Example:
On December 15, 2011 Anita did not pay loan installment. The loan already
entered as adverse collectability, then on December 31 when preparing financial
statements, they need to record arrears of installment firstly until December 31, 2011.
Meanwhile, on January 15, 2012 Anita pay off her installments in December and pay
installments in January 2012 with a fine of Rp.230.000. So, the journal of payment are:
 Date Account Debit (Rp) Credit (Rp)
Des 31 2011 RAR. Payment of Interest Arrears 13.671.750,08
RAR. Payment of Interest
Jan 15 2012 Arrears 13.671.750,08

Cash 44.329.715,06
Credit Provided 26.251.090,77
Interest Revenue 18.078.624,29
Other Income-Penalty 230.000,00

If the credit is still classified as current or in special attention, then the bank uses accrual basis
that is:
Date Account Debit (Rp) Credit (Rp)
Des 31 2011 Account Receivable 13.671.750,08
Interest Revenue 13.671.750,08
Jan 15 2012 Cash 44.329.715,06
Credit Provided 26.251.090,77
Interest Revenue 4.406.874,22
Account Receivable 13.671.750,08
Other Income-Penalty 230.000,00

E. Syndication Loan
Syndicated loans are often called joint financing. This joint financing is the
authority of the head office as the business unit that commits the financing. Examples of
co-financing: consortium, co-financing, and syndicated credit.
The consortium is a financing partnership between state banks in the provision of
investment loan and exploitation, which are regulated by a parent bank and composed of
several state banks as members. Co finance is the development of the consortium. The
pattern of cooperation in co-finance is between financial institutions and commercial
banks
Syndicated loans is financing cooperation that is theoretically unlimited. In
general, syndicated loans have the following characteristics:
 Involve more than one financial institution or bank
Have the same terms and conditions for each participant
There is only one credit documentation handled by the participating bank
This cooperation is administered by a single agent for all participating banks.
In syndicated loans, all interest revenues, revenues for provision fees, installment
amounts and credit risk are divided by the share of each participating bank. Interest
calculation use weighted average interest rate calculation methods
Example:
To finance the PT. X, Bank A as the coordinator of cooperation with Bank B, C and D.
financing Rp.100 billion with a period of 2 years. Funds transfer through BI (interbank
clearing) with the following provisions:

Participating Bank Share Interest Rate

A 20.000.000.000 19%
B 10.000.000.000 20%
C 30.000.000.000 20%
D 40.000.000.000 18%
Total 100.000.000.000

When the fund is transferred (eg May 30, 2012) from participating bank to bank coordinator (Bank
A), it will recorded by Bank A as follows:
Date Account Debit (Rp) Credit (Rp)
30 May 2012 Bank Indonesia Giro 80.000.000.000
Other Bank Giro - Bank B 10.000.000.000
Other Bank Giro - Bank C 30.000.000.000
Other Bank Giro -Bank D 40.000.000.000

To determined the interest rate paid for the debtor, it can be calculated as follows:
Participating Individual Weighted
Share Weight
Bank Interest Rate Interest Rate
A 20.000.000.000 0,20 19% 3,80%
B 10.000.000.000 0,10 20% 2,00%
C 30.000.000.000 0,30 20% 6,00%
D 40.000.000.000 0,40 18% 7,20%
Total 100.000.000.000 1,00 19,00%

With that calculation, we know that the credit interest rate charged to debtors is
19%. The interest rate is the basis to determine the principal and interest installment
value and its distribution for each participating bank.
Assuming the realization of credit with amount Rp100,000,000,000 paid on May
31, 2012 and the Bank imposes a provision and admission fee of Rp80.000.000,
insurance fee of Rp200.000.000.000, a 2-year sliding rate interest payable at the end of
each month. The direct disbursement is credited to checking account of PT. X. Based on
the illustration, Bank A as the coordinator bank will record the transaction as follow:

Date Account Debit (Rp) Kredit (Rp)

30 May2012 Credit Provided 100.000.000.000
PT. X Giro 99.720.000.000
Adm and Provision Revenue 80.000.000
Loan Insurance Premium 200.000.000

This credit provision income needs to be distributed to participating banks, while

insurance costs are transferred to insurance companies. So Bank A as coordinators , on
June, 1 2012 will record the transactions as follows:

Date Accounting Debit (Rp) Kredit (Rp)

30 June 2012 Provisions Income And Adm -Bank B 8.000.000
Provisions Income And Adm -Bank C 24.000.000
Provisions Income And Adm -Bank D 32.000.000
Loan Insurance Premium 200.000.000
Bank Indonesia Giro 64.000.000
PT Askrindo Giro 200.000.000
 Bank A as coordinator will record the income for the interest and loan principal as
follows:

Date Accounts Debit (Rp) Credit(Rp)

30/6-12 Dr. Giro PT.X 5.750.000.0000
Cr. Loan Provided 4.166.666.666,67
Cr. Interest Revenue 1.583.333.333,33.33

Delegated Dr. Loan Provided 3.333.333.333.33

(250.000.000 x
Dr. Interest60%)
Revenue 1.266.666.666,67

(47.750.000 x 60%)
Other Giro bank B 583.333.333,33
Other Giro Bank C 1.750.000.000
Other Giro Bank D 2.2666.666.666,67

Provision = M ; n
= 100.000.000.000 : 24
= 4.165.666.666.67
Interest =Mxi
=100.000.000.000 x ( 19% x 12)
= 1.583.333.333,33.33

Allocation for provision and interest in the first month is as follow:

Bank Bobot Installment Interest OSC 1 Interest Provision

(Rp) Allocation
A 0,2 833.333.333,33 19% 20 billion 316.666.666.67 1.150.000.000

B 0,1 416.666.666,67 20% 10 billion 166.666.666.67 583.333.333.33

C 0,3 1.250.000.000 20% 30 billion 500.000.000 1.750.000.000
D 0,4 1.666.666.666,6 18% 40 billion 600.000.000 2.2666.666.666.6
74.166.666.666,6 75.750.000.000
7

Installment = 4.166.666.666,67 x weight

Interest allocation = OSC 1 x (19% : 12)
 Allocation for provision and interest in the second month is as follow:

Bank Bobot Installment Interest OSC 2 Interest Provision

(Rp) Allocation
A 0,2 833.333.333,33 19% 20 billion 19.166.666.666.67 1.136.805.555.56

B 0,1 416.666.666,67 20% 10 billion 9.583.333.333.33 576.388.888.89

C 0,3 1.250.000.000 20% 30 billion 28.750.000.000 1.729.166.666.67

D 0,4 1.666.666.666,67 18% 40 billion 38.333.333.333.33 2.241.666.666.67

4.166.666.666,67 1.517.361.111.11 5.684.027.777.78

Installment = 4.166.666.666,67 x weight

OSC 2 = OSC1 the amount of Installment

Interest allocation = OSC 2 x (19% : 12)

F. Loan Rextructures
The loan assessment process often does not cover all possible risks due to
undetectable factors. Possible adverse loans will always occurs. Loan restructuring allows
the debtor's business to continue and banking funds can be saved. Credit restructuring is
an effort made by a bank in a credit business activity in order t make the debtor can fulfill
its obligations which can be done through reduction of interest rates, reduction of interest
arrears on loans, reduction of principal, and others. Thus the restructuring efforts can be
done. Please note that not all debtors who have loans problems can restructured their
credit. Banks should see the debtor's business prospects. The Bank may restructure the
loan if the debtor has good prospects and not predicted to experienced difficulty in
payment of principal and / or interest on loans.
G. Accounting Treatment Of Credit Restructurisation
The accounting treatment for credit restructuring is principally implemented in
accordance with Statement of Financial Accounting Standards (PSAK) 54 about
Akuntansi Hutang Bermasalah. PSAK 54 underline some point that need to be
considered, such as:
1. Net new book carrying value is calculated using the following order priority method,
such as:
a. The present value for expected future cash flows must in accordance with the
restructured loan by using the discount rate
b. The market value of restructured loans is stated as long as the intended value can
be obtained, for example from a specialized agencies in the framework of banking
restructuring
c. The value of collateral by valuation using the terms of the Pembentukan
Penyisihan Penghapusan Akiva Produktif, if the credit repayment depends heavily
on the collateral.
2. In the calculation for expected future cash flows of the restructured loan, the bank is
required to use the effective interest rate from the loan before the restructure as the
discount rate. In the case of a credit agreement prior to the restructuring using a fixed
interest rate, the bank may use the interest rate that reflects the fixed interest rate.
3. If the book value of new credit after restructuring by using one of the calculation
methods in point 1 is less than the credit balance prior to restructuring, the bank shall
calculate such difference as a loss. The loss is charged after the calculation of PPAP
due to credit quality improvement after restructuring.
4. In calculating the expected future cash flows for the restructured loan for the purposes
of the calculation of the cash value as referred to, in point 1, the bank is required to
use reasonable assumptions in accordance with the existing developments, in order
for the projection to be realistic.
5. In the case of a credit restructuring is done entirely by transferring assets including
securities, or credit conversion into temporary equity participation, the recognition of
losses shall be recorded at the difference in market value of the assets or equity
received with the book value of the credit
6. In the event that a credit is restructured by asset transfer including securities, or credit
conversion into equity participation and the credit is reconditioned by modification of
terms of credit, the recognition of loss is recorded at the difference between the
 market value of the asset or equity received by the book value of credit and
recognition losses on the modification of credit terms in accordance with the
provisions referred to as number 1
7. The calculation of losses for small business credit (Kredit Usaha Kecil) and consumer
loan restructured can be done by the type of credit, using statistical method or
valuation that is conducted on each credit facility in accordance with the numbers 1,
number 2, number 3, number 4.
8. Banks are required to evaluate the restructured loans on a quarterly basis. If there is a
substantial difference in the projection and realization of the principal and interest
installments, the time period, the interest rate cash flows, or the value of the
collateral, the bank shall recalculate the losses incurred.