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Is it possible to have an account on both the Balance Sheet…

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Is it possible to have...
Is it possible to have an account on both the Balance Sheet and the Profit and Loss Statement?  I would like to see my loan balance on the Balance Sheet and my payments every month on the Profit & Loss.  The P&L says I have a huge net income amount, but it doesn't include all my payments on the loan.
Submitted: 8 years ago.Category: Finance
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Answered in 39 minutes by:
6/15/2010
Financial Professional: BK-CPA, Certified Public Accountant (CPA) replied 8 years ago
BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 933
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No, not under the same body of accounting principles anyways. For items that result in temporary book/tax differences, there can be things that get recorded as a revenue/expense for tax purposes but a deferred tax liability / asset for GAAP purposes.

 

Within a single method of accounting for a single company: No. Balance sheet items retain their balances from one accounting period to the next for reporting purposes. Income and expense accounts are always adjusted to $0 for the start of a new period after being closed to 'equity.' Perhaps, if I stretch quite a bit, I could come up with some 'other comprehensive income' examples where unrecognized gains/losses have some treatments similar to your question.

 

Let me know if you need more clarification.

 

Thank you for your question.

BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Finance
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Customer reply replied 8 years ago

Thanks for your answer, but I have another question. How do you keep from what looks like overstating your profit on the P&L when the loan payments aren't reflected on it?

Financial Professional: BK-CPA, Certified Public Accountant (CPA) replied 8 years ago

The interest portion of each loan payment is an expense. The principal portion of each loan payment is not an expense, but rather a repayment on a loan balance.

 

When you get a loan, you debit cash (or an equivalent) and credit a liability account for the loan balance. When you pay the loan back, you do the opposite, meaning crediting cash and debiting the liability. You also, as part of the loan payment, would then credit cash and debit interest expense too, assuming part of your payment is interest. This can be in one entry:

 

Credit cash: $100

Debit the liability: $80

Debit interest: $20

 

(assumes a $100 payment, $20 of which is interest, and $80 which is a return of principal)

 

 

Thank you again for your question.

 

Edit: The cash flows statement will display, for users of financial statements, outgoing cash that is not expensed, but rather used to pay for things like debt service. The cash flows statement will also highlight differences between expenses that do not involve cash spending, such as depreciation on capital assets over time.



Edited by BK-CPA on 6/16/2010 at 2:34 AM EST
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