I will be taking over the books for a corporation. In 2004 a contracting company did some work for this corporation. They were invoiced $32,000 with interest. An agreement was made that is was a loan and would be paid over a period of time. It shows on the books for the corporation as a loan to the contractor for $32000. Nothing of the interest shows in any of the years. The corporation now wants to pay off the loan in total. Should the books have shown the interest accumulated all along instead of just the $32,000? If they pay it off before year-end, which it April 30th, I would like to show the proper amount in the books and on the T2 return. TIA for any insight on this.
Methodology should get you to the right place…
Take a photocopy of the contract.
Write journal entries to record what the legal contract document says.