Where is interest expense reported

To arrive at this figure, you can follow these simple steps:. Find the outstanding principal or remaining balance for the loan during the accounting period in question. Find the annualized interest rate, which should be listed in your loan paperwork. This might be for the year, month, or a specific accounting period. An accountant for Company ABC is drawing up its financial statements for the first quarter of and wants to know the interest expense for this three-month period.

To calculate this figure using the interest expense formula, it would look like:. The period is written as 0. How is interest expense handled in accounting journal entries? For double-entry bookkeeping, it would also be listed as a credit to accrued liabilities, a liability account. When an invoice is received from the creditor for this expense, the expense is credited to the accounts payable account. Like other expenses, you can list interest expense deductions on your tax return.

The interest expense deduction is something to keep in mind as a strategic way to reduce your tax burden if you need to finance assets for your business. Be sure to consult with a financial advisor to find the most advantageous rate and repayment schedule. GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices.

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Interest payable is the amount of interest on its debt and capital leases that a company owes to its lenders and lease providers as of the balance sheet date. There are several differences between the two concepts. First, interest expense is an expense account, and so is stated on the income statement , while interest payable is a liability account, and so is stated on the balance sheet.

Second, interest expense is recorded in the accounting records with a debit, while interest payable is recorded with a credit. Third, interest expense may or may not have been paid to the lender , while interest payable is the amount that has definitely not yet been paid to the lender.