Question

The journal entry to record accrued interest on a short-term note payable must include a:

a) debit to Note Payable
b) credit to Interest Expense
c) debit to Interest Payable
d) debit to Interest Expense

Answer 1

To record accrued interest on a short-term note payable, a debit to Interest Expense and a credit to Interest Payable are required, reflecting the increase in expense and future payment obligation.

Step-by-step explanation:

When recording accrued interest on a short-term note payable, the correct journal entry will include a debit to Interest Expense and a credit to Interest Payable. This is because interest that has been incurred but not yet paid is an expense and a liability for the business. Therefore, we need to increase the expense account with a debit and also record the obligation to pay this interest in the future with a credit to a liability account.