Tan Traders is owed $350 interest on an investment which has not been received by 3l December 2014, the last day of the accounting year. The adjusting entry is which of the following?
A) Debit bank $350; credit interest income $350
B) Debit accounts receivable $350; credit interest income $350
C) Debit interest income $350; credit accounts receivable $350
D) Debit interest income $350; credit accrued interest $350

Question

Quizplus · Accepted Answer

The correct adjusting entry to record interest that has been earned but not yet received is to debit (increase) accounts receivable for the amount owed to the company and credit (increase) interest income to recognize the revenue earned during the period. This reflects the accrual basis of accounting, where revenues are recognized when earned, regardless of when the cash is received.

Tan Traders Is Owed $350 Interest on an Investment Which