Accounting Dictionary - Letter S
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.
Don't see the term you are looking for? Try searching our entire website:
Not a member?
See why people join our
online accounting course:
online accounting course:
