Interest accrued and due

Dear All

How Interest accrued and Due is accounted  can any one tell me  what is stated in Schedule III?

When the doubt was raised by me whenever interest on loan is paid credit is given to Interest payable and not to loan account I am of the view that only principal portion goes to reduce the loan amount

But now I want to know what Schedule III speaks on this

can any one show the Journal entries  as per Schedule III giving an imaginary illustration of loan taken and how principal and interest is accounted

Whether Interet accrued and Due is added to Loan amount?

Thanks in advance