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During the year ended 31 March 2011 Molten-Metal plc paid loan stock interest of £22,500. Loan stock interest of
£3,700 was accrued at 31 March 2011, with the corresponding accrual at 1 April 2010 being £4,200. The loan is
used for trading purposes. Why we deduct 4200 and what corresponding accrual means?
Loan stock interest payable (22,500 + 3,700 – 4,200)Hi nataly this is the basic accounting accruals concept of deducting expenditure on a payable basis not a paid basis! We work on the same basis of deductibility for corporate tax purposes as well. Hence the payable figure for y/e 31 March 2011 is the amount paid + the amount still owing at end of period (closing accrual) less the corresponding accrual at the end of the previous period which therefore was taken into y/e 31 March 2010.
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