On Thu, 6 Oct 2005 12:17:31 -0400, in alt.accounting
A pure cash-basis system might, but I cannot imagine anyone using such a
system since it is neither GAAP, nor currently acceptable as government
accounting, nor acceptable to the IRS for property purchases.
Thank you so much for your reply. I need to ask another question please.
I understand that only the interest will show up on the income statement no
problem there, but will this also be the case with a car payment. I mean
just show the interest on the income statement under interest expense?
I am still having trouble understanding exactly what happens with the land.
If we paid 36K total on the note and assuming that 6K of it was interest
that would leave the NP Land being debited by 30K.
My problem or lack of understanding comes in with this 30K not being shown
on the income statement. It was 30K that was spent. The company no longer
has the money so how does someone looking at the income statement know that
I mean shouldn't I show this expenditure of 30K somewhere on the income
Please help with this one. I have been away from accounting for a very long
time and I am very rusty.
I am only 100 miles away from Athens!
As far as the loan goes, yes.
The vehicle will (or should) get depreciated over time unless it is a
vehicle held as inventory (ie: for sale to your customers).
For land, nothing. The purchase price gets booked as an asset (a debit
entry) and it sits there. Any cash paid at closing gets credited, as well
as a credit entry for the initial loan balance. Loan payment (the principal
portion) are debited against the loan credit balance until paid in full. If
you do your math right, it will end up with a $0 balance when paid in full.
To either, buy an asset, or to pay down a liability.
Transactions that affect cash and another asset, or cash and a liability, do
not impact the income statement.
They would however, see that the liabilities on the balance sheet went down.
Or, looking at what some call the most important financial report, the cash
flow statement, you'll notice where the money went.
That is something that also may need to be explained in the notes to the
Nope. Nothing was expensed. Except the interest.
Hey!! Two to ten hours depending on traffic and weather.
yep...the activities are just on balance sheet
accounts (note & cash)...no activity on any
income ststement accounts...unless there is %
or penalty paid....it becomes fun, tryiong to book
each monthly auto or machinery payment, using,
say 24 cupons.......each monthe the accountant must know how
much $ is %, and how much is against principal...
only then, can he/she make the correct entries to both
the bal sht and income stmt in the right amounts...
Think about it in terms of journal entries.
During the year, you will pay principal and interest on most notes, as
it sounds like you are doing here. Say you started with a note of
$100,000. During the year, you made payments of $50,000. $36,000 was
principal payments and $14,000 was interest payments.
To record the note on the books:
To record the payment of principal on the note:
To record the payment of interest on the note:
Interest Expense $14,000
Note that this assumes you are making no accruals and recording all
activity at the end of the period. Under GAAP, you would likely accrue
interest periodically by:
Interest Expense $X
Interest Payable $X
When this interest is paid;
Interest Payable $X
Hope this helps.
BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here.
All logos and trade names are the property of their respective owners.
Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee
neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.