You can't have taken a class on finance and/or accounting and passed it. This is 101 material, literally. Read the CPAs take.

And, in my initial comment i explicitly point out the error - the interest amount should not be there. People don't tend to show the working for zero * x = zero. This misunderstanding of a very fundamental piece makes any material on this topic by this author not worth reading. It might render everything they write not worth reading because they also don't know where their circle of competence stops.

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grog454 2 days ago | parent [-]

Not OP and not an accountant.

I see the reasoning for accountants keeping future liabilities off of the balance sheet. I do this myself in multiple contexts.

Still, when making decisions about whether to take out or grant a loan (personal or business) I need to consider future "value" and cash flows. To someone running a business this is probably more important than the balance sheet. So I think the interest recording criticism is valid but relatively minor in the context of the whole article.

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danielmarkbruce 2 days ago | parent [-]

It's not keeping future liabilities off balance sheet. It's marking them at their current value. Same thing for assets. Nobody wants to see a balance sheet where 30 year government bonds are written down at the sum of all interest payments to be received plus the principal. If you did that, you'd have balance sheets jumping all around the place as companies just managed cash on a day to day basis.

The vast majority of the article is trash. It's wrong in many situations. The only reason the accounting issue was brought up is it's early, and so incredibly stupid that it renders the rest of the thing untrustworthy. The rest is bad. If you don't think so, you don't know the subject and are learning from bad sources.

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grog454 2 days ago | parent [-]

Wouldn't the principle be a current liability, and the interest the future liability?

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danielmarkbruce 2 days ago | parent [-]

No.

	▲	grog454 a day ago \| parent [-]
		For those hoping for more elaboration (including myself): 1. Only the portion of the principal that is due to be paid within the next 12 months is considered a "current liability". 2. Interest is a "future cash flow" that becomes a liability as it accrues over time.