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lease payments

lgarsidelgarside Well-KnownRegistered Posts: 122
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

  • lauradlaurad Feels At Home Registered Posts: 49
    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:
  • BluewednesdayBluewednesday Font Of All Knowledge Registered Posts: 1,624
    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.
  • lauradlaurad Feels At Home Registered Posts: 49
    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:
  • lgarsidelgarside Well-Known Registered Posts: 122
    lease payments

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