Accounting Journal Entry for Interest

Interest is something that many businesses have transactions involving, whether it be a loan they must repay or an investment that they are receiving income from. Typical journal entries that effect interest are those to:

Journal Entry to Pay Interest Expense
Assuming the interest of $100 on a bond or note is due and paid on the date the interest accrues, then the journal entry would be as follows. This also assumes that there is no principle reduction at this time.
Dr. Interest Expense $100
Cr. Cash $100

Journal Entry to Accrue Interest Expense
When interest expense is accrued but not paid, for example a loan accrued interest monthly but is payable quarterly, then another type of entry would be booked. Lets say the terms say $100 is accrued monthly and $300 payable quarterly. The first entry of the quarter would be as follows.
Dr. Interest Expense $100
Cr. Interest Payable $100

Journal Entry to Pay Accrued Interest Payable
Using the above entry as an example, lets say that it is the last day in the quarter and its time to pay the $300 interest. First, we would book the entry to record the final interest expense/payable, as shown above. Our balance in expense and payable would each be $300. Now we would remove the liability as well as the cash used to pay it.
Dr. Interest Payable $300
Cr. Cash $300

Journal Entry to Receive Interest Income
Assuming the interest of $100 on a bond or note investment is paid on the date the interest is due, then the journal entry would be as follows. This also assumes that there is no principle reduction at this time.
Dr. Cash $100
Cr. Interest Revenue $100

Journal Entry to Accrue Interest Income Receivable
When interest receivable is accrued because it has not been paid yet, for example a loan accrued interest monthly but is receivable quarterly, then another type of entry would be booked. Lets say the terms say $100 is accrued monthly and $300 receivable quarterly. The first entry of the quarter would be as follows.
Dr. Interest Receivable $100
Cr. Interest Revenue $100

Journal Entry to Receive Accrued Interest Income Receivable
Using the above entry as an example, lets say that it is the last day in the quarter and its time to collect the $300 interest income. The first entry to book is the entry to record the final interest expense/payable, as shown above. Our balance in revenue and receivable would each be $300. Now we would remove the receivable asset as well as the cash is used to true it up.
Dr. Cash $300
Cr. Interest Receivable $300

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