ACCOUNTING FOR UNEARNED DISCOUNT OF FINANCE COMPANIES.
The problem of properly accounting for discount is of increasing importance in the finance field. Historically, it has been of major concern to sales finance companies. Consumer finance companies have not had to deal with it to any significant degree because their loans traditionally have been on a "per cent per month of the unpaid balance" method with interest income computed on each loan account each month. In an effort to reduce costs, however, the consumer finance companies have discovered the economies of "precomputation" of charges, i.e., of including their charges in the face of the notes their customers sign. These companies now share the problem of taking into income the discount at which they purchase their installment paper. The switch to "precomp" (discounted notes) has not been universal. The principal braking action on the movement has been the detailed and sometimes archaic and straight-jacketing state laws and regulations under which these companies operate. Many of these laws have been based on the supposition that the interests of those who utilize the services of the consumer finance companies are better "protected" if the exact number of dollars and cents charged for interest is spotlighted each month.
- DOI
- 10.2308/tar-7106810
- Volume
- 38 (4)
- Pages
- 796-801
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref