Question

Do we consider reapayment of principal amount of loan as an expense? If not then why?

Answer 1

Dear Student


When we take loan it is classified as a liability, now in case of its principal repayment, it shall not be an expense because we are reducing our liability same as we pay our creditor. Any Amount paid over and above the loan amount shall be an expense that may be interest or any penalty but since the loan is a liability, its repayment shall also be the reduction of a liability only.

Regards