An expense that is charged to an entity’ statement of income, specifically under financing expenses, reflecting the current period’s cost of borrowing (interest payments on loans, bonds, convertible debt, lines of credit, etc.) By nature, interest expenses are non-operating expenses. This expense item usually appears below the EBIT (earnings before interest and taxes) as a separate line on the statement of income.

An entity ‘s interest expense represents the interest accrued- but not necessarily paid- during a certain period. Interest is accounted for as it is charged (accrued), not when cash for interest payments is paid.