Accounts payable incurred when an enterprise purchases fixed assets and intangible assets by installment, which we call long-term accounts payable, how to make accounting entries when accruing interest on long-term accounts payable?
Accrued interest entry of long-term payables
The accounting treatment of accrued interest of long-term payables is as follows:
1. Accounting treatment during borrowing:
Debit: bank deposit
Credit: other payables/long-term payables
2. Accounting treatment for monthly interest accrual
Debit: financial expenses/construction in progress, etc
Credit: interest payable
3. Accounting treatment of repayment of principal and interest
Debit: other payables - interest payable/long-term payables - interest payable
Credit: bank deposit
Meaning of long-term payables
Long term payables in accounting business refer to various long-term payables other than long-term loans and bonds payable, mainly including payables for compensation trade equipment introduction, payables for lease fees of fixed assets under financing lease, payables for purchase of fixed assets and intangible assets by installment.
The book value of long-term payables refers to the difference between the book balance of long-term payables and the book value of unrecognized financing costs; The reported amount of long-term payables refers to the difference between the account balance of long-term payables minus the account balance of unrecognized financing costs and the long-term liabilities due within one year.
When accounting for long-term payables incurred by an enterprise, a "long-term payables" account should be set. This account belongs to a liability account. Its credit registers the long-term payables incurred, the debit registers the return amount of long-term payables, and the credit of the ending balance represents various long-term payables that have not been paid.
How to write the accounting entry "Accrue long-term loan interest"? How to understand?
1、 The interest is accrued on the balance sheet date, and the balance sheet date is the end of the year or the end of half a year. Different enterprises have different situations.
Make accounting entries in two transactions
1. When long-term loan interest is calculated.
Debit: financial expenses
Credit: interest payable
2. When paying long-term loan interest. Enterprises transfer funds through banks
Debit: interest payable
Credit: bank deposit
2、 The classification of long-term loans can be divided into:
(1) Long term loans with interest payment by installments and repayment of principal at maturity;
(2) Long term loans with one-time repayment of principal and interest at maturity;
(3) Repayment of principal and interest by installments;
Extended data:
According to the different purposes of raising long-term loans, the long-term borrowing costs can be treated in two ways:
First, it is directly included in the current expenses when incurred;
The second is capitalization.
The benchmark treatment method of borrowing costs specified in IAS 23 Borrowing Costs is:
Borrowing costs shall be recognized as an expense in the current period when they are incurred, regardless of how the borrowing is used. As an optional treatment method, it also allows the capitalization of borrowing costs that can be directly included in the acquisition, construction or production costs of related assets (see fixed assets).
The relevant assets here refer to the interest expenses incurred by the borrowing that will take a long time to be available. The interest expenses incurred by the borrower on schedule should be accrued and included in the cost of the project under construction or in the financial expenses of the current period on the accrual basis.
How to make accounting entries when accruing long-term loan interest (included in profit and loss)?
1. Accrue interest by installments, pay interest and repay principal at maturity
Obtained loan: Debit: bank deposit (actually received amount)
Credit: long-term loan principal
- Interest adjustment (debit and credit balance)
When calculating interest: Debit: manufacturing expenses (used for production inventory)
Administrative expenses (during the preparation period)
Financial expenses (during production and operation and after completion of fixed assets construction)
Construction in progress (used for construction of fixed assets and meeting capitalization conditions)
R&D expenditure (for intangible assets research and development)
Credit: interest payable
Long term borrowings - interest adjustment (debit and credit balance)
When paying interest: debit: interest payable
Credit: bank deposit
When the loan matures: Debit: long-term loan - principal
Manufacturing expenses/administrative expenses/financial expenses/construction in progress/R&D expenses (debit and credit balance)
Credit: long-term borrowings - interest adjustment
bank deposit
2. One time repayment of principal and interest:
When borrowing: Debit: bank deposit (actually received amount)
Credit: long-term loan principal
When calculating interest: Debit: manufacturing expenses (used for production inventory)
Administrative expenses (during the preparation period)
Financial expenses (during production and operation and after completion of fixed assets construction)
Construction in progress (used for construction of fixed assets and meeting capitalization conditions)
R&D expenditure (for intangible assets research and development)
Credit: interest payable
Repayment of principal and interest at maturity: Debit: long-term loan - principal
Interest payable
Credit: bank deposit
