The journal entry for accrued interest on a note payable includes ________.
A) a debit to Interest Expense and credit to Cash
B) a debit to Interest Expense and credit to Interest Payable
C) a debit to Interest Payable and credit to Cash
D) a credit to Interest Expense and debit to Notes Payable

Question

Quizplus · Accepted Answer

Accrued interest on a note payable represents interest expense that has been incurred but not yet paid. The journal entry for accrued interest on a note payable includes a debit to Interest Expense (to record the expense) and a credit to Interest Payable (to recognize the liability for the unpaid interest). Option A is incorrect because the credit should be to Interest Payable, not Cash. Option C is incorrect because the debit should be to Interest Expense, not Interest Payable. Option D is incorrect because the credit should be to Interest Payable, not Interest Expense; and there is no need to debit the Notes Payable account since that has already been recorded when the loan was received.

The Journal Entry for Accrued Interest on a Note Payable