Rick took out a business loan on 30 October 2022. The loan attracts interest at the rate of 10% per annum, payable 6 monthly in arrears. If the business year end is 31 December 2022, then 2 months interest should be recorded as income in the statement of profit or loss.

Question

Quizplus · Accepted Answer

Interest on a loan is an expense, not income. Additionally, since the interest is payable 6 monthly in arrears, no interest would be recorded as an expense by 31 December 2022, as the first payment would be due after 6 months.

Rick Took Out a Business Loan on 30 October 2022