The journal entry for accrued interest on a note payable by the borrower includes:
A)a debit to Interest Expense and credit to Cash.
B)a debit to Interest Expense and credit to Interest Payable.
C)a debit to Interest Payable and credit to Cash.
D)a credit to Interest Expense and debit to Notes Payable.

Question

Quizplus · Accepted Answer

Accrued interest on a note payable means that the borrower owes interest on the note but it has not yet been paid. Therefore, the journal entry must include a debit to Interest Expense to recognize the expense and a credit to Interest Payable to recognize the liability. This option correctly reflects these entries.

The Journal Entry for Accrued Interest on a Note Payable