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Dear Sir,
The following question requires your kind attention:In January 2009, Sarah took out a bank loan of $30000. This is to be repaid in three equal monthly installments. The first installment is due for payment on 1 January 2010. How will the outstanding balance on the loan be reported on the Statement of Financial Position at 30 September 2009?
The part that is payable within one year of the date of the statement (10,000) is a current liability. The rest of it is payable in more that one year and so is a non-current liability.
Strictly speaking, we should probably accrue interest expense too, but without any information on the interest rates, we cannot do that.
Current Liability (Short term portion of Long Term Loan): $10000
Long Term Liability (Long Term Loan): $20000If we know that the loan has a 10% pa interest rate, we could do the following:
Current Liability (Short term portion of Long Term Loan): $10000
Accrued Expenses (include Interest expense): $750
Long Term Liability (Long Term Loan): $20000And the statement of financial performance should include $750 interest expense.
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