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I watched the lecture on financial liability. I cant really get my head around why B/F was added to finance cost and coupon rate was deduced to get the carried forward. especially why finance cost was added? Please help me out
Hi,
The finance cost is an expense (a debit entry) and so we DR Finance cost CR Financial liability, and therefore add it to the b/f liability balance.
The coupon payment is a cash payment (a credit entry) and so we DR Financial liability CR Bank, and therefore deduct it from the b/f liability balance.
Hope that clears it up for you.
Thanks
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