In case of Operating lease the only cash flow is rent expense (operating lease). This rent expense is used in NI calculation. In case of capital lease, an asset and a liability (current and non-current) are created. The asset is depreciated over the lease period (or asset’s life in some cases). Total expense = depr + interest exps what happens to rent minus interest expns, which is nothing but principal amount recorded as CFF. Where does in calculation of NI this principal amount participates ? Why does any payment towards principal is not used in NI calculation ? Is it because principal amount is already registered in the form of an increment to some asset at the beginning? am I thinking in a correct direction ? thanks in advance
b/c the principle is not an expense but a cash flow, only depr is an expense
Realize that principal payments are not included in an income statement. These are balance sheet and cash flow items and only interest payments are shown in the income statement.
How are principal payments accounted on bal sheet? I mean - how A and L? And for Cash Flow - is it CFF or CFI? I think it should be CFI.
principal payments on sinking LTD are typically shown as a current liability labeled something like “Long term debt, current portion” principal payments are accounted as CFF under GAAP
principal payments are a CFF outflow. CP