If the company had a loan outstanding,which of the following would be used to record accrued interest at the end of the accounting period?
A)increase Interest Expense,decrease Cash
B)increase Interest Expense,increase Interest Payable
C)decrease Interest Payable,increase Interest Income
D)decrease Interest Payable,decrease Cash

Question

Quizplus · Accepted Answer

Accrued interest on a loan outstanding is recorded by increasing Interest Expense and increasing Interest Payable. Interest Expense is increased to account for the expense incurred by the company for the interest on the loan. Interest Payable is increased to account for the unpaid amount of interest at the end of the accounting period. Option A is incorrect because cash is not decreased to record accrued interest. Option C is incorrect because Interest Income is not applicable as the company is the borrower, not the lender. Option D is incorrect because both Interest Payable and Cash cannot be decreased at the same time.

If the Company Had a Loan Outstanding,which of the Following