If a company has a short-term note payable, it must accrue interest expense and interest payable at the end of the period.

Question

Quizplus · Accepted Answer

When a company has a short-term note payable, it must recognize the interest expense and interest payable at the end of the period in which the interest has accrued, even if the payment of interest or principal is not yet due. This is required under the accrual basis of accounting, which requires recognition of expenses and liabilities when they are incurred, rather than when they are paid.

If a Company Has a Short-Term Note Payable, It Must