What are assets that are not paid off called?

Discussion in 'Ask any question!' started by cashburger, Aug 28, 2024.

  1. cashburger

    cashburger New Member

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    This is kind of an accounting question I think.

    On a balance sheet, a machine might be listed as an asset, but if the machine is not paid off, it's kind of a liability also. But because the machine is making the company money, how would it be listed on the balance sheet? and also, would the interest/debt owed on the machine be listed on the income statement as some kind of current debt?

    In other words, if the machine brings in $20,000 profit a month, but the owed payments on the machine itself were $20,000 a month (breaking even) where would the cost owed be listed and where would the asset of owning the machine be listed, assuming it's an asset even though it's not paid off.

    I'm trying to understand how the machine would be classified and represented across both the income statement and the balance sheet.
     
  2. Gray Wolf

    Gray Wolf Well-Known Member

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    The value of the asset is what should be listed as an asset and it will incur depreciatiion. The amount owed is listed as a liability. Payments are recorded in the liability. It does not impact the income statement,
     
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  3. cashburger

    cashburger New Member

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    I got confused because while doing a lesson on Net Profit ratio, it mentioned that if the net income profit was negative wile the gross and operating profit ratios were positive, it could indicate that the company paid too much in taxes and interest.
    Can't interest come from payments on an assets such as a machine if say it was financed? I thought that could be also included on a balance sheet if it was long term financed. So confusing to get all this straight and there so many different names for the same things.
     
  4. Rayak

    Rayak Active Member

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    Wouldn't the machine be an asset, subject to depreciation?

    And the "financing" or the "payoff amount owed" be listed under "debt"?

     
  5. cashburger

    cashburger New Member

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    @Rayak
    yes that's pretty obvious.
    But I'm asking a question with respect to ratios that factor listings from different statements. I was asking where these numbers were listed and using the example of something/an abject that was both an asset and liability and where these so called negatives and positives are listed or separated to what statements..

    @ Gray Wolf
    I get what you're saying, but the ratio uses the sales revenue off the income statement and compares it to something that has interest payments. Is interest also including on the income statement?

    The instructor explains Sales to Working capital ratio. Sales Revenue divided by Working Capital = Sales to working capital ratio.

    Working Capital = current Assets - Current Liabilities

    However the instructors says for more accuracy, he's using

    Working Capital = Accounts Receivable + Inventory - Accounts Payable


    His method is on the income statement, but if you were to use the more common formula of current Assets - Current Liability's, it seems you would have to go to the balance sheet because that's were current assets and liabilities are. And I wrong?

    Anyway, disregard this topic.
    it's too difficult to explain a video you guys have not seen and I don't know how to clearly ask the question I'm asking.​
     
    #5 cashburger, Aug 29, 2024
    Last edited: Aug 29, 2024
  6. Rayak

    Rayak Active Member

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    Another thought might be to find an accounting forum, they would be much more prepared to answer these types of questions. On investing forums, we're using information and data that is available to us, we're not going out and scanning financial reports and re-calculating the data that's already there!

     

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