A debit to Interest Receivable and a credit to Interest Income are needed to record interest that has been earned but not yet received.

Question

Quizplus · Accepted Answer

When interest has been earned but not yet received by the company, a debit should be made to Interest Receivable and a credit to Interest Income. This is because Interest Receivable is an asset account that represents the amount of interest income that the company has earned but has yet to receive. Interest Income is a temporary account that is used to show the amount of interest earned during the current accounting period. By recording the debit and credit, the company is recognizing that it has earned the interest income but has not yet received it in cash.

A Debit to Interest Receivable and a Credit to Interest