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Accounting equation for the repayment of loan of $10,000, plus outstanding interest $500?
a) assets -10500, capital -10500
b) assets -10500, liabilities -10500
c) assets -10500, liabilities -10000, expense +500What is your question?
Have you watched the free lectures for Paper F3?
(I cannot type out the whole lectures here!)(If you are wanting me to give you the answer then it is (c) )
Have you watched the lectures? They cover the whole syllabus for Paper F3, and (again) I cannot type out all the lectures here!!
They pay out 10,500 so cash falls (and cash is an asset).
That repays the loan, so the loan falls (and the loan is a liability.
The other 500 is interest, which is an expense.
I am answering your questions, but you are not answering mine!
Have you watched the free lectures?The interest only becomes a liability at the end of the loan, but we have paid it.
Interest is always an expense.
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