The principal is the original sum of money borrowed in a loan or invested, excluding any interest or dividends. It is the base amount on which interest payments are calculated.
5 Must Know Facts For Your Next Test
Principal does not include interest, fees, or other additional costs.
In financial statements, the principal of a note receivable is recorded as an asset.
Repayment schedules for loans often consist of regular payments that cover both principal and interest.
For long-term liabilities like bonds, the principal amount is typically paid back at maturity.
The reduction of the principal balance over time through payments is known as amortization.