ADMS 2500 Chapter Notes -Interest, Cash Flow, Income Statement

• School: York University
• Department: Administrative Studies
• Course: ADMS 2500
• Professor: Brian Gaber

Document Summary

Scarce commodity that owners use as command to other commodities. Owners of money let others (borrowers) to rent their money for a period of time. Payment for the use of the money called interest (interest expense) Managers need to decide if they"re going to make one big lump sum payment or installments. Use interest calculations to make amounts of money to be paid or received at different times comparable. Contracts, installment purchases, leases, notes mortgages and bonds involve delayed payment or series of money payments over time. Concerned with interest because want to show economic substance of transaction. Interest and principle reported separately on financial statement. Simple interest charges occur when interest earned is withdrawn and only principle amount remains invested. When only the original principle earns interest during the life of the loan, the interest due at the time the load is repaid is called simple interest. Interest earned on previously interest is ignored.