In a certain context, it refers to the cost of money borrowed from a lender in a direct (by means of loans) or indirect way (by means of debt). Differently stated, interest is an amount charged by a lender to a borrower against the latter’s use of the loaned funds. It is usually expressed as a percentage of the principal amount borrowed, and can be either simple or compound. For a lending entity, interest is a revenue item (it adds to the entity’s assets), while for a borrowing entity, it is an expense (it results in a decrease in its assets).

In a completely different context, interest refers to the equity ownership of a person (legal or  natural) in an entity or specific assets of an entity, expressed in absolute monetary terms or as a percentage. For example, an investing entity may own 20,000 shares of an investee entity (with a base of 100,000 shares outstanding), in which case the investing entity has an equity interest or ownership interest of 20% (in the investee).