A borrower pays ₹25,000 toward principal on a loan The most appropriate accounting treatment is generally to:

Type: MCQ • Marks: 1

A. Reduce the outstanding principal by the amount properly credited to principal

B. Ignore the payment

C. Treat the entire amount as interest regardless of terms

D. Increase the principal

Explanation

Payments must be allocated between principal and interest according to the prescribed terms.

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UPSC Principal & Vice Principal Management Finance Administration

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