The journal entry accrued interest
The journal entry for accrued interest will depend on the specific circumstances of the transaction. However, in general, the journal entries for accrued interest is:
Debit: Interest Expense
Credit: Interest Payable
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This journal entry records the interest expense that has been incurred by the company but has not yet been paid. The interest expense is debited to the income statement as an expense, and the interest payable is credited to the balance sheet as a liability.
For Accrued Interest Income on FD/RD/Deposits:
Debit: Bank Account/ FD/RD/Deposits
Credit: Interest Income (Indirect Income)
FAQs:
- What is accrued interest?
Accrued interest is interest that has been incurred but not yet paid or received. - When do you record accrued interest?
You record accrued interest at the end of an accounting period when interest expense or revenue has been incurred but not yet paid or received. - How do you record accrued interest in a journal entry?
Debit the interest expense account and credit the accrued interest liability account. - What is the purpose of accruing interest?
To ensure that financial statements accurately reflect expenses and revenues in the period they are incurred, not when cash is exchanged. - What accounts are affected by accrued interest?
Interest expense (or revenue) and accrued interest payable (or receivable). - Is accrued interest a liability or asset?
Accrued interest is a liability if you owe it, and an asset if someone owes it to you. - What happens to accrued interest when paid?
When paid, you debit the accrued interest payable account and credit cash. - How does accrued interest impact financial statements?
It increases interest expense or revenue in the income statement and affects liabilities or assets in the balance sheet. - Does accrued interest affect net income?
Yes, accrued interest expense reduces net income, while accrued interest revenue increases it. - How is accrued interest different from interest payable?
Accrued interest is interest that has accumulated but is not yet due for payment, while interest payable is due for payment.
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