Answer to Question #154512 in Management for Prabhdeep

Question

explain the various provisions of principles of lending

Answer 1

Various provisions of lending include;

a) Restructuring liabilities.

This is done by some companies when they are facing bankruptcy. The companies can do restructuring process by reducing interest on loans, or extending the dates when the company's liabilities are due to be paid.

b) Provisions of bad debts.

This is whereby the estimation of the amount of doubtful debt that will need to be written off during a given period of time.

c) Guarantees.

Loan guarantees can help borrowing microfinance institutions obtain loans that otherwise are unavailable to them.

d) Depreciation.

Annual depreciation charge is an expense and has a debit nature.

e) Accruals.

An accrual expense is the one that is known to be due in the future with certainty. The expense has already accrued but not yet been paid.

f) Pension.

Pension schemes are restricted in the amount they can borrow under the Finance Act.