indenture (plural indentures) (law) A contract which binds a person to work for another, under specified conditions, for a specified time (often as an apprentice). (law) A document, written as duplicates separated by indentations, specifying such a contract. An indentation. (Can we add an example for this sense?) Translations
What it is: Interest expense is the cost of money. Interest expense is recorded on the income statement. Let's assume you need $500,000 to buy a house. The price of borrowing that money is interest, and it is expressed as a percentage of the amount of money you obtain.
From January 1 to February 1, the company incurs interest expense, but it does not pay it with cash until July 1. Nevertheless, Friends Company has to record the incurred interest expense and accrued liability for the month of January. Interest expense for one month = $120,000 x 5% (semiannual rate) x 1 Ã· 6 = $1,000.