Acca financial Accounting (FA) Study Text ac ca (FA)

Chapter 13 

KAPLAN PUBLISHING

227 

Accounting entries 

When the finance is first received the company receiving the finance must 

recognise the obligation to repay the loan holder as follows: 

Dr Cash 

$X 

Cr Non-current liability 

$X 

Every year the business should recognise a finance charge (i.e. interest) based 

upon the terms of the agreement as follows: 

Dr Finance charges (P/L) 

$X 

Cr Cash/current liabilities 

$X  

(depending on whether the interest has been paid or not). 

Test your understanding 5 

Custard Creameries is an incorporated business which needs to raise 

funds to purchase plant and machinery. On 1 March 20X5 it issues 

$150,000 10% loan notes, redeemable in 10 years’ time. Interest is 

payable half yearly at the end of August and February.