hi all, a company i know borrowed some money from nbfi based on the AR but not exactly factoring. just as a security. the interest is simple interest. interest and principal is same over a period of 2yrs. The lender wants the company to show the total liability including interest in our books.
Its a challenge as u all know interest we will charge to p&l on monthly basis and principal goes to BS as liability.
Do any of you find a way to show full liability?
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Loan accounting
Replies (3)
I think, it is same. Just club the interest liability to the loan amount at year end.
When you didn’t pay the interest
Interest expense a/c—> recognised annually
To Accumulated Interest a/c—> accumulated on balance sheet under current liabilities
If interest is paying monthly , then it is to be recognised as an expense and should be shown in profit and loss account , Can not club with loan account .
Interest is an current expense , Loan is future liability .
Interest is an current expense , Loan is future liability .
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