These payments are generally made monthly on the last day of the month and do not require an accrual entry. Variable rate interest payments reflect the current interest rates based upon outstanding principle amounts. To determine the appropriate amount of the accrual for fixed rate interest, divide the amount of the next interest payment per the amortization schedule by the number of months in the payment period (For example, divide by six months if the payments are made semi-annually). If the auxiliary unit prefers to complete monthly accruals, quarterly accruals will still be completed by the Office of the Treasurer and any monthly accruals must be reversed by the beginning of the last month of each quarter to ensure no duplication of accruals occur at the end of each quarter.
The auxiliary unit is still responsible for verifying the accuracy of the accruals.Įach auxiliary unit also has the option to accrue interest expense monthly. These accruals should reverse either at the end of each quarter or in the month the actual interest expense is paid, whichever occurs first. For example, actual interest payments may be made by the Office of the Treasurer in May and November therefore, accrual entries will be recorded by the Office of the Treasurer for each quarter. Indianapolis Housing is an example of an auxiliary unit that undergoes this activity.įixed rate interest payments are generally paid semi-annually. The amount of the accrual is determined by the amortization schedule, which can be obtained from the University Office of the Treasurer. The Office of the Treasurer creates quarterly accruals for Auxiliary and Service Center accounts holding this type of debt to properly reflect interest expense in the accounting period it is incurred. This is done largely through the issuance of public bonds. On occasion, it is necessary for the University to issue debt in order to raise money for construction or renovation of parking garages, academic facilities, student housing, or other capital projects.
The entry should be recorded so that the income statement and balance sheet are fairly stated, satisfying the matching principle 1. This entry is recorded to recognize the expense in the month it is incurred rather than the month it is paid. To account for it in the correct accounting period, an accrual entry should be recorded. Accrued interest is an expense resulting from interest owed on debt. To account for accrued interest in accordance with Generally Accepted Accounting Principles (GAAP). 33.0 - Accrued Interest Expense on Long-term Debtģ3.0 - Accrued Interest Expense on Long-term DebtĪccrued Interest Expense on Long-term DebtĪuxiliary Accounting, Financial Management Services.
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