Penalty interest refers to the interest that the bank will calculate on a daily basis if the borrower fails to repay within the specified time limit of the bank, resulting in overdue payment. The penalty interest paid by an enterprise is subject to accounting treatment in two cases:
1. If the contract requires late payment and penalty interest payment, it shall be recorded as non operating expenses. The accounting entries are:
Debit: Non operating expenses
Credit: bank deposit
2. If there is no requirement in the contract, it can be recorded as financial expense. The accounting entries are:
Debit: financial expenses
Credit: bank deposit
Among them, non operating expenditure refers to the expenditure unrelated to the daily business activities of the enterprise, including public welfare donation expenditure, extraordinary loss, inventory loss loss, damage and scrap loss of non current assets, etc. Financial expenses refer to the financing expenses incurred by an enterprise to raise funds needed for production and operation, including interest expenses (less interest income), exchange gains and losses, and related service charges, discount interest incurred by commercial bill discount, and cash discounts incurred or received by the enterprise.
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What does penalty interest mean
? When people borrow from financial institutions, they often hear the word "default interest". So, what does penalty interest mean? Let's introduce the general content.
? Penalty interest refers to an interest paid to a financial institution because the borrower fails to repay the loan within the specified time of the financial institution. The penalty interest is regarded as a punishment for the overdue loan. Generally, there are two ways to calculate the default interest. One is to calculate according to the agreement on the loan contract. The other is to calculate the interest according to the relevant regulations of the People's Bank of China.
? Since January 1, 2004, the default interest rate of overdue loans (loans that the borrower fails to repay on the date agreed in the contract) has been changed to 30% - 50% higher than the loan interest rate specified in the loan contract; The default interest rate of the borrower who fails to use the loan for the purpose agreed in the contract is changed to 50% - 100% higher than the loan interest rate specified in the loan contract.
? For loans that are overdue or not used for the purpose agreed in the contract, interest shall be charged at the default interest rate from the date of overdue or not used for the purpose agreed in the contract until the principal and interest are paid off. For the interest that cannot be paid on time, compound interest shall be charged at the penalty interest rate.
What is the meaning of default interest
? Now when I go to the bank for a loan or apply for a credit card, if it is overdue, there will often be a penalty interest. But what does the penalty interest mean? Many people must not know it. Let's introduce it today.
What does penalty interest mean
? The so-called default interest is the overdue default interest generated by the lender's failure to repay the loan at the time agreed in the contract, which can be called the overdue interest of the loan. The existence of penalty interest is to encourage people to keep their promises. If you don't keep the agreement, you will be punished to urge you to repay on time.
? After understanding what the penalty interest means, we might as well look at how the penalty interest is calculated. Because this is the most concerned issue.
What is the penalty interest
? In fact, the Central Bank has long explained the penalty interest rate, which is 30% - 50% higher than the loan interest rate specified in the contract. Generally, the financial hook or the bank will calculate the penalty interest based on the interest exceeding the contract to punish the borrower.
? Due to the difference of loan products, the calculation method of overdue default interest is different between different banks and different loan products. But there is a simple formula for reference: overdue default interest=overdue principal x daily default interest rate x overdue days.
? For example, if the lender Xiao Zhang is overdue and has a default interest, the overdue principal is 5000 yuan, the loan interest rate on the contract is 8% per annum, the daily interest rate is about 50% of the default interest rate, and the overdue days are 30 days, then the amount of default interest he needs to pay is: default interest=yuan.
What are interest, compound interest and default interest
1. Interest is the use fee of money in a certain period, which refers to the remuneration that the money holder (creditor) receives from the borrower (debtor) for lending money or monetary capital. Including deposit interest, loan interest and interest incurred on various bonds. Under the capitalist system, the source of interest is the surplus value created by employing workers. The essence of interest is a special form of transformation of surplus value and a part of profits.
2. Compound interest refers to the method of calculating interest for the interest generated in the previous interest cycle of a fund in the next interest cycle in addition to the interest generated by the principal.
3. Penalty interest is the penalty paid by the borrower for overdue payment due to non repayment on the specified date. The lender can extend the loan. At this time, the lender will generally modify the original term. During the remaining loan period, the lender will raise the interest rate, which is called the default interest rate.
Extended data:
Marxism believes that the essence of interest is a part of profit and the transformation form of surplus value. Money itself cannot create money and will not increase in value by itself. Only when functional capital uses money to purchase the means of production and labor, can it create surplus value by employing workers in the production process. Monetary capitalists share surplus value with functional capitalists by virtue of their ownership of capital. Therefore, the separation of capital ownership and capital use right is the internal premise of interest generation.
