Interest Income (Example, Types) | Interest Income in Accounting

In this video on Interest Income, we discuss the topic in detail including definition, types and interest income in accounting with examples.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐈𝐧𝐜𝐨𝐦𝐞?
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Interest income is the amount assigned as interest gained by the investments of the company. It is the income gained from the lending of money.

𝐓𝐲𝐩𝐞𝐬 𝐨𝐟 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
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The following are 2 types of Interest Income

#1- Income from Operations
#2 - Non-Operating Income (Other Income)

𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐈𝐧𝐜𝐨𝐦𝐞 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠
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#1 - The interest is reported as earned and not necessarily as paid by making the assumption that the risk of getting payment is low with regard to the accrual method of accounting.

#2 - Interest income should not be confused with dividend or combined with it as both are distinct. The dividend is paid to the owners of the common or preferred stock of a company and it implies the allocation of the retained income of the issuing company.

#3 - The penalties paid by the customers on receivable overdue accounts are also treated as income since these payments are related to the use of the funds of the firm such as the customer's receivable accounts.

#4 - The asset types that assist the bank earn interest are varied like mortgages. Auto loans, personal loans and real estate business loans.

To know more about the 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐈𝐧𝐜𝐨𝐦𝐞, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/intere...

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