The journal entry to record the payment of an interest-bearing note is
A) debit Cash; credit Notes Payable
B) debit Accounts Payable; credit Cash
C) debit Notes Payable and Interest Expense; credit Cash
D) debit Notes Payable and Interest Receivable; credit Cash

Question

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When a payment is made for an interest-bearing note, both the principal amount and the interest amount need to be recorded. Therefore, we should debit both the Notes Payable and Interest Expense accounts. Cash should be credited since it is being paid out. Option A is incorrect because it only records the principal amount. Option B is incorrect because it refers to accounts payable instead of notes payable. Option D is incorrect because it records interest receivable instead of interest expense.

The Journal Entry to Record the Payment of an Interest-Bearing