What Is Interest Due?

Interest payable (Accrued Interest Payable) It refers to the interest payable by an enterprise in accordance with the contract, including interest absorption on deposits, long-term borrowings due for repayment of interest due in installments, and corporate bonds. The subjects can be calculated by depositor or creditor. The difference between interest payable and accrued interest: Interest payable belongs to borrowing, and accrued interest belongs to corporate deposits.

Interest payable

[Example] On January 1, 2007, A Co., Ltd. borrowed a short-term loan for production and operation from the bank, totaling 120 thousand yuan, with a term of 9 months and an annual interest rate of 8%. According to the loan agreement signed with the bank. The principal of the loan will be returned once upon maturity; interest will be withdrawn monthly and paid quarterly. The relevant accounting treatment of Company A is as follows:

(1) When borrowing short-term loans on January 1:

Borrow: bank deposit 120000

Loan: short-term borrowing 120000

(2) At the end of January, when accruing interest in January:

Borrow: Finance costs 800

Loan: Interest payable 800

Amount of interest to be accrued this month = 120000 × 8% ÷ 12 = 800 (yuan)

In this example, the short-term loan interest of 800 yuan belongs to the financing expenses of the enterprise and should be included in the "financial expenses" account.

The treatment of accruing interest expenses in February at the end of February is the same as in January.

(3) When paying interest on bank loans in the first quarter at the end of March:

Borrow: interest payable 1600

Finance costs 800

Loan: bank deposit 2400

In this example, the interest accrued from January to February is 1,600 yuan, plus 800 yuan in March. The actual interest paid was 2,400 yuan. Credit the "Bank Deposit" account.

The accounting treatment for the second and third quarters is the same as above.

(4) When repaying the principal of bank loans on October 1st: ^[1]

Borrowing: short-term borrowing l20000

Loan: bank deposit 12 000

If the above loan period is 8 months, the maturity date is September l. The accounting treatment before the end of August is the same as above. Repay the principal of bank borrowings on September 1, and pay the unpaid interest in July and August at the same time:

Borrowing: short-term borrowing l20000

Interest payable 1600

Loan: bank deposit 121600