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Interest Schedule

January 13, 2012
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What is Debt?

  • Debt is the fund borrowed from one party by the other party i.e. debt is an obligation owed by the borrower of fund to the lender of fund.
  • Debt is not available freely it has a cost called interest expense.
  • Interest expense is the cost paid by the borrower for the use of money he/she has borrowed.
  • Normally, debt has repayment schedule that shows periodic repayment amount which takes care of both principal repayment and interest payment for that particular period.
  • Debt can be in the form of bank loan, bonds, mortgages etc.

Procedure for preparing Debt Schedule and interest Schedule

Step 1: Add the old bonds issued with the new issuance


Step 2: Calculate the interest payment

clip_image003Interest Expense

Interest payment on old bonds

Interest payment on old bonds

Interest payment on new bonds

Interest payment on new bonds

Total Interest Payment- sum the interest payments on both the bonds

Total Interest

Thus, we form our Debt and Interest schedule. We then include this in our Profit and Loss statement along with our Fixed Asset schedule. Finally, now our Profit and Loss statement (or Income Statement) is complete!


You can take a look at the complete Income statement here. Now you can see whether our Chocolates are a sweet deal or not!!


About the Author

Pankaj Baheti is a CFA Level III Candidate currently working with Pristine. Prior to Pristine, he was working with Achi Group. He has done his Post Graduate Diploma in Management and loves trekking in the hills of Arunachal.


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