Make big profit

14 Responses to “Accounting question – Can borrowed money be considered a profit?”

1. bossrules, on July 28th, 2010 at 3:59 pm Said:

   there is no way that borrowed money is aprofit……..it is a tense in mind like…when will u b getting that amt

2. Wiseone, on July 30th, 2010 at 12:16 am Said:

   no, because you will have to share that money which will then result in a net loss rather than a gain. A scenario in which it would be viable as a profit would be if you gain more money than you need to pay off your loans.

3. Elizabeth., on August 1st, 2010 at 4:22 am Said:

   No way! you still OWE the lender in FULL.

   It’s a debt.

4. John M, on August 1st, 2010 at 4:33 am Said:

   The money borrowed is an asset, and the money owed is a liability. the interest you pay in exchange for the use of the money is an expense. If you invest the money, and it generates income in excess of the interest expense, that would be profit, less the costs you incurred to obtain and service the loan. so the only profit would be the money you make from the loan, above and beyond all costs associated with it.

5. M O, on August 3rd, 2010 at 3:06 pm Said:

   Borrowed money is a balance sheet liability (note payable), it is not a revenue or expense account, and is not used to factor operating or net income. That is GAAP.

6. Ronatnyu, on August 5th, 2010 at 9:17 am Said:

   No.

   Profit is a concept for initial funds that have been used for business purposes and after all expenses & taxes have been paid …. that is profit.

   If you borrow money to get started its classified as an asset but offset as an equal liability amount.

7. Diana S, on August 8th, 2010 at 5:29 pm Said:

   No way. Borrowed money cannot be profit. I mean you have to give it back dont you?So its not really profit because its not yours

8. Am_I_Bluffin'??, on August 12th, 2010 at 2:26 am Said:

   Borrowed money must always be considered a liability.

9. quizzard123, on August 15th, 2010 at 2:02 am Said:

   No, because there is a corresponding liability account which acts to reduce assets.

   So while assets rise (cash on hand), liabilities also rose (debt incurred). A profit results in an increase in assets over liabilities.

   QED no profit.

10. Charles G, on August 18th, 2010 at 10:07 am Said:

    Borrowed money increases cash flow.

    It debits cash on hand, credits with the owed (new) liability-net effect for profit purposes, zero.

11. nealeclark, on August 19th, 2010 at 12:56 pm Said:

    You wouldn’t call it a profit. But if you failed to repay the loan, the lender can cancel the debt and in most cases that would be taxable as income on a US tax return.

12. prescientone, on August 19th, 2010 at 10:55 pm Said:

    No…and do not show as income as it is not taxed as income.

13. David Z, on August 19th, 2010 at 11:44 pm Said:

    Only if the lender forgives the debt. If the lender forgives the debt you would treat it as income at that time.

    But until then this is a liability on your books.

14. travelguruette, on August 20th, 2010 at 4:37 pm Said:

    It is a loan to be paid back. Profit is sales minus expenses.

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