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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Liability-principal & interest
Hello Mike
My question is this:
If an entity borrows 100,000 from the bank, but the interest on the loan is 20,000, would the total liability in the balance sheet be 120,000 or would it be the 100,000 only? If it is 100,000 then how is teh 20,000 treated?
Dr Cash $100,000
Cr Loan / Bank Loan / Bank Overdraft $100,000
Interest of $20,000?
Either:
Dr Finance costs $20,000
Cr Cash $20,000
or
Dr Finance costs $20,000
Cr Loan / Bank Loan / Bank Overdraft $20,000
OK?
