Hello Mr John,
Carbon is a limited liability entity. a trial balance for the year ended 31 December 20x5 is presented below.
8%loan repayable- January 20x5 50000
The following notes are relevant to the preparation of the financial statements for the year ended 31 December 20x5.
Task4) the loan was taken out on 1 October 20x5. No interest has been accrued.
According to the book: Income Statement Fiance costs (50000*8%*3\12)
Statement of fiancial Position [accrauls:1000$}
why they are charging finance costs only 1000$ shouldn't we charge it with 4000$.(9 month in 2015 plus 3month in arrears)
for example at the beginning of the year 20x5 we have accruals brought forward 1000$ (2014:October, November, December).
thank you in advance!!!
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trial balance
5y ago#1If they took out the loan on 1 October, then as at 31 December they only owe interest for the period from 1 October to 31 December, which is 3 months.
Thank you!! I understood accrual charge of 1000$(for 3 month) but why they are charging the income statement ---finance cost only 1000$ --- Should we charge it with 12 month expense 4000$
Mr.John what about the rest of 3000$? where should we put it? for example, From January till the October 20x5 there was a payment for the interest. Am I right?
Thank you!!! I understood my mistake. Have a nice day!!!
5y ago#5You are welcome :-)
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