answersLogoWhite

0

Interest on loan to a business is a finance cost. Irrespective who the loan is coming from, the cost of sericing the loan, that is, the interest, is to be charged in the Income Statement. In theory it is not an appropriation (division) of profit.

User Avatar

Wiki User

15y ago

What else can I help you with?

Related Questions

Is partnership deed a public document?

No, partnership deed is not a public document it is mutual agreement among the partners of the partnership firm stating there profit/loss sharing ratios, rate of interest on loan & on capital and salaries/remuneration of the partners etc


Why is interest typically paid on a loan?

Interest is typically paid on a loan to compensate the lender for the risk of lending money and to generate profit for the lender.


Where do you place loan interest in the trading account and is it an expense?

As an expense, loan interest should be placed in the debit side of the Profit & Loss A/c and not in the Trading a/c.


How do lenders profit from loans?

Lenders profit from loans by charging interest on the money they lend out. This interest is a fee that borrowers pay for the privilege of using the lender's funds. The higher the interest rate, the more profit the lender makes on the loan.


What are the example for Finance cost in profit and loss account or income statement?

Interest on Loan


What is the definition of interest rates?

An interest rate is the amount of money a bank can charge on the loan that they provide you. That is how they make their profit. If they didn't charge an interest rate and just loaned out money, then there's no way they can make money off of the loan.


How do banks profit from Islamic finance?

Islamic banks profit differs from most other countries. It is illegal for an Islamic bank to charge interest on a loan. A loan can only be for the value of the item. The person receiving the loan however, will pay an extra amount which is considered a gratuity.


Would banks decrease or increase interest rates if they had less money to loan?

If banks had less money to loan they would increase their interest rates. This is because they would have to make the most profit off of the little money that they had to use. When banks have a lot of money to loan, interest rates are lower because they can still get a lot of interest even from the lower interest rates.


How can I obtain an interest-free loan?

You can obtain an interest-free loan by looking for organizations or programs that offer such loans, such as certain non-profit organizations, religious institutions, or government agencies. You may also consider asking family or friends for a loan without interest. Be sure to carefully review the terms and conditions of any loan agreement to ensure it is truly interest-free.


How do lenders profit from reverse mortgages?

Lenders profit from reverse mortgages by charging fees, interest, and closing costs on the loan amount. They also earn money through servicing fees and by receiving the home as collateral if the borrower defaults on the loan.


How do banks earn profit from lending money to their customers?

The customer pays the bank interest on the loan. The bank pays some of this interest to its depositors. The difference between incoming interest and outgoing interest (minus operating costs) is the bank's profit. With most loans charging more than 10% interest and most deposit accounts paying less than 0.5% interest, the bank can make loads of profit!


What is low interest loan?

The loan whose interest rate is low is called low interest loan. If you got a unsecured loan @ low interest rate then it would be low interest loan for you.