Following are finance cost recognized in financial statements

  1. Interest expense
  2. Issue cost

Journal Entries

Interest expense                             DR

Accrued Interest                                    CR

(To record interest accrued at period end)

Accrued Interest                             DR

Cash                                                          CR

(To record payment of interest accrued in previous period)

Issue cost                                           DR

Cash                                                           CR

(To issue cost incurred)

Unlike issue cost of share capital, issue cost of debt capital (bank loan, loan notes) is recognized in SOCI. Financial liability cannot be reduced by the amount of issue cost, as finance providers will be paid (redeemed) in full on maturity.

SOCI (Extract)

Operating Profit                xxx

Finance cost

Interest expense               xxx

Issue cost                            xxx

Profit after Tax                  xxx

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