XYZ invested $1 million with a bank for 1 year on 1 April 2019 at 10 per cent (interest payable at end of loan). What is the debit side of the adjusting entry at 30 June 2019?

Question

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Since the interest is payable at the end of the loan, no revenue has been recognized on the income statement for the period ending 30 June 2019. However, XYZ has earned interest revenue for the first three months of the loan (April, May, and June). Therefore, XYZ needs to recognize accrued revenue receivable, which is the amount of interest revenue earned but not yet received. The debit side of the adjusting entry will be DR Accrued revenue receivable $25,000.

XYZ Invested $1 Million with a Bank for 1 Year