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Earned Income and Interest Income

Solution

My question is why is the Earned interest (Business Loan)in negative also what is the difference between the Earned interest and the Interest income
 

Answer

First the difference between Earned Income and Interest Income emanates from Cash And accrual accounting.

Earned Interests are interests that are due and expected to be paid by the loan clients.

Interest Income is income that is actually received from the loan clients when they make loan repayments which reduce their loan account balances.

The difference between them is that Earned Income is recognised when income is due irrespective of whether the client has made payments or not. Interest income is recognised only when cash is received from the client.

For those who practice the accrual basis, both the Earned and Interest Income Received are added to their Interest Income on Loan portfolio when configuring their Regulatory and management reports.

For those who go by the cash basis, only the Interest Income received is added to their Interest Income on Loan portfolio when configuring their Regulatory and management reports. The earned in this case is added to unearned income to form the interest receivable on loans.


 
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Article details
Article ID: 5
Category: Frequently Asked Questions (FAQ)
Date added: 2015-01-21 10:50:55
Views: 322
Rating (Votes): Article rated 3.1/5.0 (15)

 
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