An adjusting entry made to record accrued interest on a note payable due next year consists of

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An adjusting entry made to record accrued interest on a note payable due next year consists of debiting Interest Expense and crediting Interest Payable. As interest accrues during the period, it increases the amount owed to the lender, and thus increases the interest payable. The debit to Interest Expense records the expense incurred by the borrower during the period for the use of the borrowed funds.

An Adjusting Entry Made to Record Accrued Interest on a Note