Liabilities, such as loan finance, on the other hand, are remunerated by interest, which is charged to profit or loss as an expense.Select one:TrueFalse

Answer Explanation

The statement is True. Here's the reasoning:

1. Understanding Liabilities: Liabilities represent obligations that a company owes to external parties. They can include loans, credits, and other forms of debt.

2. Interest on Liabilities: When a company borrows money, it usually incurs a cost in the form of interest. This is especially true for loans and credit facilities where the lender charges interest for the use of their funds.

3. Financial Reporting: According to accounting principles, interest expenses related to these liabilities are recognized on the income statement. This means they are charged against the company’s profits, thereby reducing the overall profitability measured during accounting periods.

4. Profit and Loss Statement: The payment of interest is reflected in the profit or loss statement as an expense, thus impacting the net income of the firm. This accounting treatment ensures that the financial position of the organization is accurately represented to stakeholders.

In conclusion, liabilities like loans are indeed associated with interest payments, which are accounted for as an expense in the profit or loss statement, making the statement true.