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Josh Reilly is the owner of Dispatch Delivery Service. Recently, Josh paid interest of $4,500 on...

  1. Josh Reilly is the owner of Dispatch Delivery Service. Recently, Josh paid interest of $4,500 on a personal loan of $75,000 that he used to begin the business. Should Dispatch Delivery Service record the interest payment? Explain.

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Answer #1

Answer No. Dispatch Delivery Service should not record the interest payment

as

Business entity concept says that the existence of owner is different from the existance of the bussiness so the loan taken in personal capacity will not be treated as loan taken for the business although subsequently it is being used for the purpose of the business but when it was taken it was takne for personal us

Hence it ll be wrong if interest is recorded in the business books

so no interest should be recorded.

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