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Hello,
The amortised cost table is widely used to help arrive at figures needed in calculations when dealing with financial assets and financial liabilities. The common structure is:
Opening Interest (effective rate) Payment (F.L.) / Receive (F.A.) Closing
X X (X) / X XI know that the interest (effective rate) is what ia charged to the Income Statement as this is the effective interest we are paying (due to different circumstances that can be applicable with these instruments).
I’ve gotten quite confused using this table because if we take a financial liability for example we charge the effective interest (2nd heading above) to the income statement; But for the actual payment (3rd heading above) should this not be our finance charge going to the income statement as this is what we do actually pay on the loan? Could you help me with the double entries when you have a typical financial liability and the charges going to the income statement and payments made please?
I had the table above neatly arranged but when I submitted the question it got jumbled into mess due to formatting. It should look like:
Opening ——— Interest (effective rate) ———–Pay/Receive——————-Closing
—X——————————X—————————–(X)/X——————————X
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