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John Moffat.
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firelion28
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If a business has an annual interest of 5% to pay on a loan of $20,000 which it takes on 1st Aug 2005, and the year end is 30 September 2005.
The annual interest is $1000!
in the income statement an interest of $166 will be charged and the business has paid
Sir in the SOFP, wont we charge 1000 as a current liability as we owe that 1000 as an interest in the next 12 months.
Than
John Moffat
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No!
As at the 30 September 2005, if they have paid the interest up to that date then nothing is owing.
If the interest up to that date has not been paid then 2/12 x 5% x $20,000 = $167 is owing (which is in both cases the expense in the SOPL).
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