How do you Calculate Interest Payable?

The borrowing cost is calculated by multiplying principle amount with the annual interest rate

simple Interest payable can be calculated;

yearly ---  principle amount * interest rate/100

monthly --- principle amount * interest rate/100 *no. of months/12

 

 

Its very simple by mulitiplying Principal Amount with Interest rate and numbers of years. Interest payable = P * r*t

Principal amount * interest rate / 100*time period.

As per mutual agreed by both parties whatever the rate and period.

Multiply the principal loan amount by the annual interest rate.  The result then is multiplied by the loan's time period.

Interest=(interest rate/Number of payments) x Principle Amount

Another method is the loan amortization table method

(interest rate / number of payments)*loan principal

Divide your interest rate by the number of payments you'll make in the year (interest rates are expressed annually). So, for example, if you're making monthly payments, divide by 12. 2. Multiply it by the balance of your loan, which for the first payment, will be your whole principal amount.

its calculated by deviding the numberof days basing on the loan given out to the individual with the percentage agreed on.

Assume company borrows 10k USD on 1st January. The loan is for 1 year at a rate of 5%. 

Simple interest is calculated as follow: 10000*0.05= 500/12= 41.7 USD per month.

Company accrues interest expense each month, so the entry will be made as follow:

Debit Interest expense 41.7

Credit Interest Payable 41.7