A three-year loan of £100,000 will be repaid at the end of three years as £133,100.

No interest is payable during the three-year period. The interest included in the loan repayment arrangement is equivalent to a compound annual charge of 10% per annum.

Explain how this transaction would appear in the income statement (profit and loss account) and statement of financial position (balance sheet) over the three-year period.