Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
How should an interest only loan be recorded? Defintion of an Interest Only Loan An interest only loan specifies that only interest payments are required during the life of the loan. No principal payment is required...
How is a short term bank loan recorded? Definition of Short Term Bank Loan When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its...
What is an escrow payment? An escrow payment is an amount deposited with another party and it is to be released only for its specified purpose. The following is one example of an escrow payment. A borrower and lender...
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
In financial accounting this term refers to the amount of debt excluding interest. Payments on mortgage loans usually require monthly payments of principal and interest.
An asset account in a bank’s general ledger that indicates the amounts owed by borrowers to the bank as of a given date.
How do I record a loan payment which includes paying both interest and principal? Definition of a Loan Payment A loan payment is likely to consist of three amounts: Total payment amount Interest payment Principal payment...
A company’s supplier is unable to obtain a bank loan. The company agrees to guarantee that the supplier’s bank loan will be repaid. As a result of the company’s guarantee, the bank makes the loan to the supplier....
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
What is the purpose of assigning accounts receivable? The purpose of assigning accounts receivable is to provide collateral in order to obtain a loan. To illustrate, let’s assume that a corporation receives a special...
What is the entry when a company lends money to an employee? Definition of Employee Loan When a company lends money to one of its employees, the company is reducing its Cash and increasing another asset such as Other...
assume that a regular U.S. corporation has: A loan with an annual interest rate of 10% An incremental tax rate of 30% (combination of federal and state) If the corporation has a loan of $100,000 with an annual interest...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
The lender (bank) that receives an asset as collateral for a loan.
An asset which serves as collateral for a loan.
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
The person or business that receives a loan from a bank or other lender.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
Accounts receivable that serve as the collateral for a loan.
A series of equal amounts occurring at the end of each equal time interval. Also known as an ordinary annuity. An example would be the monthly payments on a loan. Another example is the semiannual interest on a bond.
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
The borrower who provides to a lender an asset as collateral for a loan.
Usually a bank, finance company, or person that makes a loan to another party, who is referred to as the borrower.
A payment toward the amount of principal owed. Generally when a loan payment consists of only a principal and interest payment, the amount owed for interest is processed first and the remaining amount of the payment is...
A series of equal amounts occurring at the end of each equal time interval. Also known as an annuity in arrears. An example is the monthly payments on a loan. Another example is the semiannual interest on a bond.
Taking out a loan or issuing bonds in order to acquire an asset or another business.
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
The systematic allocation of the discount, premium, or issue costs of a bond to expense over the life of the bond. The systematic allocation of an intangible asset to expense over a certain period of time. The systematic...
in the company, the cash will increase the company’s current assets with no increase in current liabilities. Therefore working capital will increase. If a company obtains a long-term loan to replace a current...
-term or noncurrent liability. Example of a Note Payable If a company borrows money from its bank, the bank will require the company’s officers to sign a formal loan agreement before the bank provides the money. The...
Where are short-term bank loans reported on the statement of cash flows? Definition of Short-Term Bank Loans Short-term bank loans are generally loans that must be repaid within one year of the date of the balance sheet....
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
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