lease payments

lgarside
lgarside Registered Posts: 122 Dedicated contributor 🦉
in General accounting discussion
Hello can someone just remind me, if a company is purchasing an asset with a 20,000 loan is it just the depreciation cost that goes through the P&L or does the loan payment of say 1000 a month get written off to the P&L aswell? Can't remember if it does or if if just reduces the amount of debt on the balance sheet?

Comments

  • laurad
    laurad Registered Posts: 49 Regular contributor ⭐
    good question.
    id guess at just reducing the liability on on the BS. so your credit entry would be the bank when the money goes out and your debit entry would be the BS to reduce the liability

    id be intrigued to see what others think..we havnt got this far in class yet. or if we have i missed it :lol:
  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
    When you pay off a loan, the payment is split between the interest and the capital. The capital part reduces the liability and the interest is written off in the profit and loss account.
  • laurad
    laurad Registered Posts: 49 Regular contributor ⭐
    Bluewednesday wrote: »
    When you pay off a loan, the payment is split between the interest and the capital. The capital part reduces the liability and the interest is written off in the profit and loss account.

    of course!!! makes perfect sense. forgot about interest :blushing:
  • lgarside
    lgarside Registered Posts: 122 Dedicated contributor 🦉
    lease payments

    Thanks guys that makes sense!!! It's amazing what you forget!!!!

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