Interest payable on a loan becomes a liability:
A) When the borrowed money is received.
B) When the note payable is issued.
C) At the maturity date.
D) As it accrues.

Question

Quizplus · Accepted Answer

Interest payable on a loan becomes a liability as it accrues, which means over time as the interest expense is incurred. It is not recognized as a liability at the point of receiving the borrowed money or issuing the note payable, as the interest has not yet accrued. It also doesn't happen all at once at the maturity date, as interest is typically paid or accrued periodically throughout the life of the loan.

Interest Payable on a Loan Becomes a Liability