Accounting Dictionary - Letter S

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Simple interest
is calculated using the principal only and does not consider any previously accrued interest. For example, if an entity deposits $1,000 in a savings account with a 10% simple annual interest, the interest for the first year is $100 (i.e., $1,000 x 10%). The interest for the second year will be based on the original principal of $1,000 and still be $100. The $100 interest earned during the first year is not considered in calculating the interest during the second year.
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