The adjusting entry to record interest that has accrued on a note payable to the bank will cause an immediate:

Question

Quizplus · Accepted Answer

Accrued interest on a note payable represents an expense that the company owes but has not yet paid, and therefore increases the liability. At the same time, the accrued interest reduces the company's profit because it represents an expense. Therefore, the adjusting entry to record accrued interest on a note payable will result in an increase in liabilities and a reduction in profit, which is only reflected by choice letter A.

The Adjusting Entry to Record Interest That Has Accrued on a Note