Borrowings from Federal Reserve banks in the past have been of such short time character as to make unnecessary the daily accrual of interest charges thereon. That is, payments for interest were made so frequently that, for practical purposes, they reflected the actual situation. However, when banks under any condition borrow from others for rather long periods, and prepay their interest, they might well consider the plan of accruals explained in the preceding paragraphs. The entries to cover such accruals at the time of rediscount would be as follows:

At the end of each month or earning period the following entries should be made:

Debit: Interest Paid on Money Borrowed Credit: Prepaid Interest on Borrowings