If the interest expense on a note payable for the period ending December 31 is $830, and this amount is payable on January 1, it means that the interest has accrued but has not been paid as of December 31. This is a common accounting practice, where interest is recognized as an expense in the period in which it is incurred, even if it is not paid until a later date.
To record this interest expense in the financial statements for the period ending December 31, the following journal entry would be made:
Accrued Interest Expense:
Debit: Interest Expense $830
Credit: Accrued Liabilities $830
This journal entry reflects the recognition of the interest expense on the income statement and the corresponding increase in the accrued liabilities on the balance sheet.
Then, when the actual payment is made on January 1, the following journal entry would be recorded:
Payment of Accrued Interest:
Debit: Accrued Liabilities $830
Credit: Cash (or Bank) $830
This entry reflects the payment of the accrued interest, reducing the accrued liabilities on the balance sheet and decreasing the cash (or bank) account.