What adjusting journal entry is made when an entity wants to prepare financial statements,owes interest on a borrowing during the year,but hasn't paid either the loan or the interest?
A)debit prepaid interest;and credit interest expense
B)debit interest payable;and credit interest expense
C)debit interest expense;and credit interest payable
D)debit interest payable;and credit loans payable

Question

Quizplus · Accepted Answer

The correct adjusting journal entry for owing interest on a borrowing that hasn't been paid is to debit interest expense (to recognize the expense in the income statement) and credit interest payable (to recognize the liability on the balance sheet). This reflects the accrual basis of accounting, where expenses are recognized when incurred, not necessarily when paid.

What Adjusting Journal Entry Is Made When an Entity Wants