What is Debt?
- Debt is the fund borrowed from one party by the other party i.e. debt is an obligation owed by the borrower of the fund to the lender of the fund.
- Debt is not available freely it has a cost called interest expense.
- Interest expense is the cost paid by the borrower for the use of money he/she has borrowed.
- Normally, debt has the repayment schedule that shows periodic repayment amount which takes care of both principal repayment and interest payment for that particular period.
- Debt can be in the form of bank loan, bonds, mortgages etc.
Thus, we form our Debt and Interest schedule. We then include this in our Profit and Loss statement along with our Fixed Asset schedule. Finally, now our Profit and Loss statement (or Income Statement) is complete!
You can take a look at the complete Income statement here. Now you can see whether our Chocolates are a sweet deal or not!!