You might hear people say that they “need to learn to live within a budget.” The funny thing is that most people who say this haven’t actually prepared a personal budget, nor do they intend to. Instead, what they are referring to is a vaguely defined, poorly specified collection of rough ideas of how much they should spend on various aspects of their lives. However, you can’t live within or even outside of something that doesn’t exist. With that in mind, let’s take a look at one aspect of personal-budget templates.
Many personal-budget worksheet templates that are provided for college students treat student loans as an income source. See, for example, the template provided at fi nancialplan.about.com/cs/budgeting/l/blmocolbud.htm. Based on your knowledge of accounting, is this correct?
YES: Student loans provide a source of cash, which can be used to pay costs. As the saying goes, “It all spends the same.” Therefore, student loans are income.
NO: Student loans must eventually be repaid; therefore, they are not income. As the name suggests, they are loans.
Write a response indicating your position regarding this situation. Provide support for your view.