This is my first post and I just wanted to say what a great resource and community this is. Hopefully over time I will be able to add to it and help others.
I have the following question that I would appreciate some help with. I have been asked to do some bookkeeping for a sole trader. The capital introduction was via a personal bank loan, for which the interest payable should be a business expense in the P&L account. Unfortunately, the loan is in the name of the boyfriend who has no input into the business. Therefore, is the interest payable an allowable expense as in effect the sole trader has loaned the money from the boyfriend with no interest obligations, with the boyfriend being personally responsible for the interest?
Sorry if I am wide of the mark, it's been a while since my bookkeeping days and I'm a little rusty.
Yeah it's a tough one. The loan is in the boyfriend's name, but is the business repaying the boyfriend the loan?
If they are repaying that loan, then it seems reasonable to put the interest against the profit, as the boyfriend is in effect, in a no-gain-no-loss situation being reimbursed by the business.
If the business is not repaying the loan and the interest is being paid by the boyfriend, then I wouldn't put it against the business at all.
Thanks for your insight. I'm not sure on the exact layout as I only have a general overview at the moment. Your answer has given me some food for thought and I think that your treatment of the interest is a logical approach. Thanks again.
Thanks again.
