The journal entry to record accrued interest on a note receivable at year end is:
A)debit Interest Receivable and credit Interest Revenue.
B)debit Note Receivable and credit Interest Revenue.
C)debit Interest Receivable and credit Note Receivable.
D)debit Cash and credit Interest Receivable.

Question

Quizplus · Accepted Answer

Accrued interest is interest that has been earned but not yet received or recorded. Therefore, we need to debit Interest Receivable (an asset account) to record the increase in the amount of interest owed to us and credit Interest Revenue (a revenue account) to record the revenue earned. Option B is incorrect as it suggests debiting Note Receivable, which is not affected by the accrual of interest. Option C is also incorrect as it suggests crediting Note Receivable, which does not accurately record the transaction. Option D is incorrect as it suggests that cash has been received, which is not the case for accrued interest.

The Journal Entry to Record Accrued Interest on a Note