ACC 100 Final: What happens if you borrow money from the bank

• School: Ryerson University
• Department: Accounting
• Course: ACC 100
• Professor: Else Grech

Document Summary

As a business expands they oten have to borrow money from creditors, called a loan. There are two concepts that must be understood about loans: principal and interest. Generally (although not always) it must be repaid at some point in the future. The date it is due (must be paid) is determined by the agreement with the creditor. Interest is the cost of borrowing money and it is similar to rent: you pay rent when you borrow space and you pay interest when you borrow cash. Interest is due after you have used the cash for a period of ime (for example, at the end of every month). The cost of borrowing, the interest rate, is again determined by your agreement with your creditor. When you borrow from a creditor there are two main types of loans: an operaing line of credit and tradiional bank loan.