Interest can come under multiple expense categories, depending on the business and how the interest is used. The most common categories for interest are:
- Operating expenses: Interest on loans used for business operations is typically classified as an operating expense. This is because the loan is used to finance the day-to-day operations of the business.
- Capital expenses: Interest on loans used to finance capital expenditures is typically classified as a capital expense. This is because the loan is used to finance the purchase of long-term assets, such as equipment or real estate.
- Other expenses: Interest on loans used for other purposes, such as personal loans, is typically classified as an other expense. This is because the loan is not used for business operations or capital expenditures.
The correct expense category for interest will depend on the specific business and how the interest is used. It is important to consult with a accountant or financial advisor to ensure that interest is properly classified.
The information provided in this article does not constitute legal or financial advice and is for general informational purposes only. Please check with an attorney or financial advisor to obtain advice with respect to the content of this article.

“Accurate classification of expenses is vital for businesses as it forms the backbone of financial reporting, tax compliance, and strategic decision-making. It enables businesses to track and analyze their spending patterns, identify cost-saving opportunities, and assess the profitability of various operations or projects. Having a single source to turn to for accounting classification suggestions, such as the Ramp Expense Classifier tool, is immensely helpful as it provides consistency, reduces ambiguity, and streamlines the expense classification process.”
Audrey Carroll
Senior Manager, Accounting, Ramp