Author Topic: whats the share???....This is a little confusion thing.  (Read 1694 times)

jagggi

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whats the share???....This is a little confusion thing.
« on: December 31, 2015, 07:33:41 AM »
Hello Everyone!

Greetings and warm new year wishes :)

I have a very simple and confusion doubt!, The following is the situation of a financial loan, where Person A have taken a loan from Bank XYZ and Person B is the brother of person A, who have paid the loan amount to the Bank XYZ. Hear the question is how much does the Person A spent?


1. At first Person A have taken a loan of 6 lakh from bank XYZ.
2. Person B have Paid the loan amount of 6 lakh to the bank XYZ.
3. So now the loan Of the Bank XYZ is cleared.

Now here are the questions of the two persons.

1. How much does person A spent?, 6 lakhs or 12 lakhs?

Here following are the points both argue:

1. Person A says that he have spent only 6 lakhs, so his due is only 6 lakhs.
2. Person B says that the person A have spent total of 12 lakh. (i.e. 6 lakh spent by Person A and the rest 6 lakh given to the bank)

Now please tell how much does the person A spent actually?

arebelspy

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Re: whats the share???....This is a little confusion thing.
« Reply #1 on: December 31, 2015, 11:56:17 PM »
6.

Picture this, to help understand it.

Pretend person A already had the 6 in their wallet.  They took out the $6 loan anyways (and now have 12).  They then spend the $6 they had to start with, then hand back the 6 back to the bank that they borrowed.

The only money spent was the original 6.  Taking money, and handing it back, didn't "spend" any more (assuming no interest or transaction fees).

Person A borrowed 6, and spent it, and now needs to pay it back.  But that paying it back isn't spending. 

So they spent 6, they don't have to "spend" another 6 paying back person B.  They do have to earn $6 to pay it back, but they never had 6 in the first place, they went into debt and obligated their future self to earn that 6.  But they never had to earn $12 (which they would if they spent $12), they just had to earn $6 (the loan wasn't "earning" the money), cause they only spent 6.

 
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Re: whats the share???....This is a little confusion thing.
« Reply #2 on: January 02, 2016, 09:25:23 PM »
Answer: Person A owes Person B 6 lakh.

BEFORE LOANS (pretend starting amounts):

Person A
Assets:  ₹‍10L
Liabilities:  ₹0
Net: ₹10L

Person B
Assets: ₹100L
Liabilities: ₹0
Net: ₹100L

Bank
Assets: ₹200L
Liabilities: ₹0
Net: ₹200L


BANK LOANS PERSON A ₹6L

Person A
Assets:  ₹‍16L
Liabilities:  ₹6L (payable to bank)
Net: ₹10L

Person B
Assets: ₹100L
Liabilities: ₹0
Net: ₹100L

Bank
Assets: ₹200L (except instead of ₹200L cash, this is ₹194L cash and ₹6L receivable from Person A)
Liabilities: ₹0
Net: ₹200L

PERSON B PAYS BANK:

Person A
Assets:  ₹‍16L
Liabilities:  ₹6L (payable now to Person B, as B cleared A's debt to bank)
Net: ₹10L

Person B
Assets: ₹100L (except instead of ₹100L cash, this is ₹94L cash and ₹6L receivable from Person A)
Liabilities: ₹0
Net: ₹100L

Bank
Assets: ₹200L (this is back to ₹200L cash)
Liabilities: ₹0
Net: ₹200L

So now Person A owes Person B ₹6L.

From your question, we can't tell how much was spent (we use "spent" to refer to money used for buying things, not to anything relating to loans).  We don't know what Person A did with the 6 lakh loan, just that Person A is still in debt by 6 lakh.

Also, if your example is based on real life, Person B probably had to pay interest on the ₹6L loan to clear Person A's debt to the bank.  If this is the case, Person A needs to pay Person B the ₹6L PLUS the interest that Person B paid to the bank PLUS possibly some interest for time between B paying the bank and A repaying B.

Does this help?