The checking account of a small healthcare business pays interest each day the balance in the account exceeds $1,000. The bank credits the account with the accumulated interest at the end of each month. How should the interest income be posted?

Question

Business

Mylee Norton

5 February, 07:17

The checking account of a small healthcare business pays interest each day the balance in the account exceeds $1,000. The bank credits the account with the accumulated interest at the end of each month. How should the interest income be posted?

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Kareem Knapp · Answer 1

The Interest should be posted as an Income as Other Income in the Income Statement.

Explanation:

Interest income is the amount received by an entity from another usually a Bank for the use of its funds.

The recognition of Interest Income will be determined by the type of business of the entity. For income to be identified as under Business Operation income, it means it must be a huge source of revenue or part of its daily operations. A healthcare business is not in the business of loaning funds neither does it earns it major revenue from Bank deposits.