Hello all, I've a simple question,
When I issue a bond, I think two distinct liabilites are created; the principle I owe until the maturity and the annual interests I've to pay. However, it seems to me that the annual interests are not shown 0on the balance sheet. Is it intentional and is there a reason behind it or am I missing something?
For instance, in the exemple below I expect to see the annual payments of the bond issuer as liabilites on his/her balance sheet, but I see only the principal and the loans from the banks:
Interest Payments of Issued Bonds
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Neskmadran
- Posts: 4
- Joined: Sat Dec 19, 2020 4:34 pm
Interest Payments of Issued Bonds
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- Loans.png (816.09 KiB) Viewed 1461 times
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- Bonds.png (1.02 MiB) Viewed 1461 times
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smplfy
- Posts: 14
- Joined: Mon Apr 20, 2020 9:22 pm
Re: Interest Payments of Issued Bonds
[DUPLICATE POST]
Last edited by smplfy on Wed Aug 17, 2022 1:03 am, edited 1 time in total.
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smplfy
- Posts: 14
- Joined: Mon Apr 20, 2020 9:22 pm
Re: Interest Payments of Issued Bonds
GAAP is not violated here. Having interest payable in this game would be redundant and be one more point of failure for the underlying code.
In-game, the monthly amount of what would be interest payable is cleared each month to interest expense on the P&L. From day one to the last day of the in-game month, you are right - there is no interest payable accruing visually on the balance sheet by the game engine. But what would be the applicable accrual in interest payable is getting paid (with cash) each month at the same time the interest expense is recognized, leaving no interest payable balance to carryforward to subsequent months throughout the fiscal year.
The in-game JE would look something like this:
+ Dr. Interest Expense (increase expenses on the P&L), which also reduces retained earnings on the balance sheet at the same amount as cash)
- Cr. Cash (reduces assets on the balance sheet)
______________________________________________
= 0
In-game, the monthly amount of what would be interest payable is cleared each month to interest expense on the P&L. From day one to the last day of the in-game month, you are right - there is no interest payable accruing visually on the balance sheet by the game engine. But what would be the applicable accrual in interest payable is getting paid (with cash) each month at the same time the interest expense is recognized, leaving no interest payable balance to carryforward to subsequent months throughout the fiscal year.
The in-game JE would look something like this:
+ Dr. Interest Expense (increase expenses on the P&L), which also reduces retained earnings on the balance sheet at the same amount as cash)
- Cr. Cash (reduces assets on the balance sheet)
______________________________________________
= 0