If you are reporting Interest income on an instrument like a bond that had accrued interest at the time you purchased, then yes, you would reduce your interest income by the accrued interest at your purchase date. Enter the full amount of the interest, and then enter the Accrued Interest paid as an adjustment to reduce it.
When you see the screen "Do any of these uncommon situations apply?", check the box that says" I need to adjust the interest reported on my form" or "I need to adjust the taxable amount". Read the Learn More link that appears:
Accrued Interest: You purchased a bond between interest payment dates and had to pay some up-front interest for the days you didn't own the bond. This means that part of the interest payment you are reporting actually went to someone else - probably the previous owner of the bond. You'll need to subtract the amount that went to someone else.
... then, enter the adjustment in the box provided.
See this thread for another discussion of this topic.
See here for more information from the IRS on this topic.
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