Accounts some help please?
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It is called buying on margin. It is usually considered extremely high risk and not worth doing unless you really know what you are doing.
No. it's what it is ie. a loan, not income. You need to record the loan in your accounts as a debt and the interest payable is usually tax deductible. But of course I have no idea what country you are in or what the accounting/tax laws are there!
If you are talking about accounting terms (been awhile since I took accounting, so this may be wrong) the stock would be classified as short term investment and the loan would be classified as a financing activity.
OK first of all I will say that is not really a good idea to make loans to buy stocks, it is risky, you have to pay interest for the loan so you really have to be very careful what stock you buying.
Anyway, the loan will be a liability for your business, recorded in Loans payable (short term if is with a 12 months period, or long term over 12 month).
You have to Debit Cash account and credit Loans Payable when you do the bookkeeping.
When you buy the stocks will be also either a short or a long term investment, I think stocks should go under short term investment. When you sell the stocks and hopefully you made some money out of it, than you'll record the profit as an income, otherwise will be a lose of course.
Good luck!
A loan is a liability
read through this notes to get a clear understanding on the fundamentals of accounting
http://www.futureaccountant.com/accounti...
Loan is not income.If you invest the loan amount in income generating avenues,the income generated may be taxable.
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