I just joined our condo association’s finance committee. While reviewing our contracts, I found a financing agreement related to our insurance premiums. Our balance sheet does not show the loan. The liability was not recorded. The down payment of the loan was recorded as prepaid insurance. Monthly loan invoices were/are recorded as payables when received. The payables are reversed and recorded as insurance expense when paid. The costs associated with the initial financing and monthly interest expense were/are not segregated out and were/are recorded as insurance expense.
Should the financing agreement have been recorded as a liability? Should the financing costs and interest expense be recorded as insurance expense?
Thank you for your help.
Should the financing agreement have been recorded as a liability? Should the financing costs and interest expense be recorded as insurance expense?
Thank you for your help.