The adjusting entry to record accrued interest on a note payable requires a debit to
A) Interest Income and a credit to Notes Payable.
B) Interest Payable and a credit to Interest Expense.
C) Interest Expense and a credit to Cash.
D) Interest Expense and a credit to Interest Payable.

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, interest on a note payable is recognized and recorded as an expense in the period it is incurred, even if it has not yet been paid. Therefore, the adjusting entry required to record accrued interest on a note payable is a debit to Interest Expense and a credit to Interest Payable. The other answer choices are incorrect because they do not appropriately reflect the recognition and recording of accrued interest as an expense and liability.

The Adjusting Entry to Record Accrued Interest on a Note