alt Hacker NewsFrom someone who does this for a living - danielmarkbruce is right about the mechanics. When you borrow £100, you book £100 as a liability. The interest doesn't exist yet.
Interest gets recognised as it accrues over time. Each month (or whatever period), you debit interest expense and credit accrued interest payable. The liability grows as time passes.
Recording future interest upfront would violate the matching principle - you can't recognise an expense for something that hasn't happened yet. If you pay off the loan early, you don't owe that interest.
That said, I think the article's bigger point about how money flows still holds. The technical accounting is just one layer of how this stuff actually gets recorded.
He's talking about bonds, though. These can't generally be paid back early. The same goes for some other loans like mortgages which often come with an agreement that you won't pay it back within a number of years (unless you pay a fee). If you intend to pay back the interest normally then you could totally book it as a liability up front, it's the same thing at the end of the day. I mean, it is literally a liability. You've agreed to pay back the amount of the loan plus interest.
I'd encourage people doing their own accounts to think of it like this and don't do things that professional accountants do "just because".
The thing is accounting is all made up. We try to squeeze this idea of "value" into this abstraction called "money" and make it all work. But it's trivial to find cases where it's overly simplified and doesn't really work.
For example, how do you book depreciation of a motor vehicle? For the average person with a single utility vehicle the vehicle's value remains roughly the same from the moment of purchase until the moment is is written off. The value is its utility to you. In my accounts, I book this simply as "1 car" in my assets. But accountants don't like that. Everything has to be valued in money. So you end up with stupid stuff like averaging the depreciation over time that is pure fiction and only exists to make the books work and reduce the "shock" when a vehicle is finally written off.