Question

The journal entry to recognize accrued interest on a note receivable includes a____to interest revenue and ato interest receivable. (Enter either debit or credit in each blank.)

Answer 1

The journal entry to recognize accrued interest on a note receivable includes a debit to Interest Receivable and a credit to Interest Revenue, reflecting earned but unpaid interest in the financial statements.

Step-by-step explanation:

When a company accrues interest on a note receivable, it must make a journal entry to properly account for the revenue earned that has not yet been received.

This journal entry involves debiting Interest Receivable and crediting Interest Revenue. Accounting principles require that interest earned in a period be recorded in that period, even if the cash will not be received until a future date.

Here's the journal entry:

• Debit: Interest Receivable
• Credit: Interest Revenue

This accounting action increases the Interest Receivable account on the balance sheet, representing money owed to the company, and increases the Interest Revenue account on the income statement, reflecting earned revenue.