Interest income on loan to partner

Technical topics regarding tax preparation.
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Hi Pros, I hope everyone is well. We have a client (S corp with only one owners) who has a 400k loan to owner. Yes, this is something they are working on getting paid back. They are accruing interest on this loan using an applicable federal rate. Question on if we are doing this correct. Let's say we accrue interest income of 6k. So the S corp would debit loan for 6k and credit interest income for 6k.

We have been reporting this on the K1 going to the shareholder as interest income. This has not been paid yet though. Is this just a book entry, or a book and tax entry, and the shareholder has to pay tax on the interest income even though the S corp has not been paid back for the loan or interest? Thank you in advance for any insight. Take care.
 

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