The Accounting Review Vol. 10 No. 3 1935
PREPAID INTEREST.
Abstract
The article discusses consistency in accounting for prepaid expenses. It refers to an article by researcher Robert P. Hackett, published in the June 1934 issue of the journal The Accounting Review. The true foundation of the theory is in the idea that liabilities should be valued at their present value rather than their maturity value. The alleged inconsistency does not arise from the technique of accounting for prepaid expenses but from the technique of accounting for liabilities. Because interest-bearing instruments are recorded at present value and non-interest-bearing instruments are recorded at maturity value, some accountants contend that so-called discount or prepaid interest exists only as a convenient method of taking up the difference between the recorded maturity value of liabilities and the present consideration received. Hackett compares the technique of accounting for prepaid interest as advocated by professor William A. Paton, with the customary method of accounting for prepaid rent and purports to find an inconsistency in the two methodologies.
- DOI
- 10.2308/tar-7075605
- Volume
- 10
- Issue
- 3
- Pages
- 298-301
- Language
- en
- Sources
- crossref openalex