True, in the case of installment notes, interest expense is calculated as a constant percentage of the carrying value.
What is interest expense?
An interest expenditure is the cost incurred by a company to borrow money. The income statement item of interest expenditure is a non-operating item. It denotes the interest owed on all outstanding borrowings, including bonds, loans, convertible debt, and credit lines. To put it simply, it is calculated by multiplying the interest rate by the outstanding principle balance of the debt.
The amount of interest expenditure on the income statement represents interest accumulated over the reporting period as opposed to the amount of interest paid during that time. For enterprises, interest expenses are tax deductible; however, depending on the jurisdiction and the loan's purpose, it may not be the same for individuals.
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