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Categories >> Accounting >> Accounting General
 
 


 

 
 Audit interview questions  Audit Interview Questions (428)
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 Accounting General interview questions  Accounting General Interview Questions (2810)
 Accounting AllOther interview questions  Accounting AllOther Interview Questions (4360)
Question
What is the difference between Loan and Advance?
 Question Submitted By :: Accounting-General
I also faced this Question!!     Answer Posted By  
 
Answer
# 1
Loan- Is an amount given for a specified period and is
recoverable with a particular interest rate.


Advance- means it is given for a temporary basis to meet out
cause (say)purchases, Travel expenses etc., Interest is not
charged on this advance amount.

Both are Balance sheet items.
 
Is This Answer Correct ?    88 Yes 30 No
Lxmi1972
 
Answer
# 2
Loan refers to money lent to a borrower for Short-Term,
Long-Term or for unspecified period (Working Capital
facility which is renewed every year). Loan carries a
specific rate of interest as agreed between the lender & the
borrower and the terms of the agreement. A loan may be for
general purpose (Say working capital) or specific purpose
(Equipment loan, Export Packing Credit, etc.)

On the other hand Advance refers to money paid in advance to
any one to meet a specific future expense, liability or to
tide over some specific requirements. Advances paid by an
employer to employee may be to meet certain expenses like
official travel, or to meed some personal needs in the form
of salary advance. Advance paid to meet official expenses
will be settled once it's expended for the said purpose,
salary advance may be recovered by deduction form monthly
salary as per the policy of the company.

Again advance may be paid to discharge a future liability.
For example :Income Tax paid in Advance. Again advance may
carry interest - The company may charge nominal interest on
the advance paid to it's employees. In case of Income Tax
advances, the Government will written the advance in excess
of actual tax liability with interest to the asessee who has
paid advance tax.
Again there may be payment of money in advance by a buyer to
a supplier of goods & there may be a clause in the purchase
order that, the supplier will be liable to pay interest at a
specified rate in the event of delay in supply as per the
terms of Purchase Order accepted by them.

One major difference between the two is :Loan is always
under a contractual arrangement between the lender and the
borrower & it carries interest, but generally advance is
made with out agreement and may not carry interest in all cases.
 
Is This Answer Correct ?    43 Yes 2 No
H.r. Sreepada Bhagi
 
 
 
Answer
# 3
LOAN :The loan can be given to any one with proper
approval with a nomial interest rate and it is receovered
in easy instalments it is liability in balance sheet

Advances: Advance is given to a known interal person of a
company to meet his offical expenses incurred by him,
ex.travel expenses,purchase of stationery, etc.it is
liability in balance sheet
 
Is This Answer Correct ?    40 Yes 20 No
Devaraj
 
Answer
# 4
loan always comes with the interest but advance always
been without interest.

for ex- v provide loan for a particular period against
security but advance always given to a known or any
official for a particular work without any specific period.
 
Is This Answer Correct ?    11 Yes 5 No
Shailendra
 
Answer
# 5
loan is against a security but advance is not against any security, for example vehicle loan given to employees is against the security of the vehicle and if advance is given for travel then it is not against any security 
Is This Answer Correct ?    20 Yes 16 No
K
 
Answer
# 6
A security is created in the case of a loan whereas in the case of an advanced, security is already there. A moving asset (i.e. Car) is created in the case of a Car Loan. The best example of an advance is Cash Credit secured by hypothecation of stocks. An advance is granted for a short period, say for a period of 12 months, renewed annually. 
Is This Answer Correct ?    3 Yes 2 No
Sridhar K S
 
Answer
# 7
LOAN OR ADVANCE- BOTH ARE TREATED AS A CREDIT FACILITY. BUT IF THE CREDIT FACILITY IS REPAYABLE IN A SHORT PERIOD SAY WITHIN ONE YEAR IT IS TREATED AS "ADVANCE" AND IF THE CREDIT FACILITY IS REPAYABLE MORE THAN A YEAR IT IS TERMED AS "LOAN" 
Is This Answer Correct ?    3 Yes 6 No
K. Sailendranath
 
Answer
# 8
Advances is a short term period with in one year, but Loan is long term period with in more than one years. 
Is This Answer Correct ?    0 Yes 3 No
Ali Hassan. K
 
Answer
# 9
loan is what i own and the advanis is what i own. wow what
an answer sirjee..!!!
 
Is This Answer Correct ?    4 Yes 19 No
Gnani
 

 
 
 
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