Definition:
Debt service is the amount you pay on a loan in principal and interest, over a period of time. Usually debt service is calculated for a year. Banks and other lenders prefer that you list debt service separately on your Income Statement (P&L).
For income tax purposes, the interest on the loan is considered a deductible business expense, while the principal is not.
Also Known As: loan payment amount
Examples:
If your business borrows $100,000 at 9 percent interest, for 10 years, the first year principal and interest is $6333.79. This amount is your "debt service" for the first year.
