Answer: Since in the question, the interest is due but not received so we debit the accrued interest and credit the interest account.

What is interest due but not paid?

Accrued interest is the amount of interest that is incurred but not yet paid for or received. If the company is a borrower, the interest is a current liability and an expense on its balance sheet and income statement, respectively. Accrued interest can be reported as a revenue or expense on the income statement.

When to make a journal entry for interest payable?

When the company pays the interest in the next period, it can make the journal entry for the interest paid by debiting interest payable with the interest expense of the new period and crediting the cash account. This journal entry is made to eliminate the liability that the company has recorded at the adjusting entry of the previous period.

When does interest expense go into the account?

Interest expense usually incurred during the period but not recorded in the account during the period. That is why the company usually needs to make the adjusting entry at the end of the period for the interest expense together with other transactions, such as accrued salaries and taxes.

How does the interest income journal entry affect the balance sheet?

Likewise, the total income and assets will be understated in the financial statements if no necessary adjusting entry is made for the interest income. The interest income journal entry will increase both the income and assets in the income statement and the balance sheet respectively.

Which is an example of an expense journal entry?

At the same time, it is to record the expense incurred during the current period. For example, on April 16, 2020, the company ABC Ltd. signed a two-year borrowing agreement with XYZ bank in the amount of $50,000. The agreement requires the company to pay monthly interest on the 15 th day of each month with an interest of 1% per month.