Interests on Loans - Income or Expense?

by Santa Betty
(Kenya)

Q: is interest on loan an income or expense?

A: Usually, when talking about a loan, we're talking about you or your business taking out a loan. In this case, you or your business pay interest on the loan.

In this case the interest is an expense.

If however, your business gives out loans (i.e. you are a bank or a similar financial institution), then you will charge your customer interest on the loan.

In this case, the interest is your income.