The journal entry for a note collected by the bank with interest requires a credit to Cash and a debit to both Notes Receivable and Interest Revenue.

Question

Quizplus · Accepted Answer

When the bank collects a note receivable with interest, it will credit the amount received to the Cash account, and will debit both the Notes Receivable account (to cancel the original loan) and the Interest Revenue account (to record the interest earned). Therefore, a journal entry for this transaction would include a credit to Cash and a debit to both Notes Receivable and Interest Revenue.

The Journal Entry for a Note Collected by the Bank