Asked by Aliyana Shivji on May 04, 2024
Verified
Interest expense on a bank loan payable is only recorded at maturity.
Interest Expense
The cost incurred by an entity for borrowed funds over a period, shown as an expense in the income statement.
Bank Loan Payable
A liability account that records the amount owed to a bank by the borrower, to be paid back with interest.
Maturity
The date on which a financial instrument, such as a bond or loan, is due to be repaid in full.
- Understand the accounting treatment and implications of interest expenses and finance charges.
Verified Answer
MM
Matthew McNellisMay 10, 2024
Final Answer :
False
Explanation :
Interest expense on a bank loan payable is typically recorded periodically over the term of the loan, not just at maturity, to accurately reflect the cost of borrowing over time in accordance with the accrual basis of accounting.
Learning Objectives
- Understand the accounting treatment and implications of interest expenses and finance charges.
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