Quick Answer: How Do You Record Interest Expense On A Balance Sheet?

Is interest a liability or asset?

Interest expense can be both a liability and an asset.

Prepaid interest is recorded as a current asset while interest that hasn’t been paid yet is a current liability.

Both these line items can be found on the balance sheet, which can be generated from your accounting software..

Is Accounts Payable a debit or credit?

Since liabilities are increased by credits, you will credit the accounts payable. And, you need to offset the entry by debiting another account. When you pay off the invoice, the amount of money you owe decreases (accounts payable). Since liabilities are decreased by debits, you will debit the accounts payable.

Where does interest expense go on a balance sheet?

Interest expense often appears as a line item on a company’s balance sheet, since there are usually differences in timing between interest accrued and interest paid. If interest has been accrued but has not yet been paid, it would appear in the “Current Liabilities” section of the balance sheet.

What is the journal entry for interest expense?

The lender usually bills the borrower for the amount of interest due. When the borrower receives this invoice, the usual accounting entry is a debit to interest expense and a credit to accounts payable.

How do you record adjusting entry for interest expense?

Making an Adjusting Entry At the end of each month, make an interest payable journal entry by debiting the monthly interest expense to the interest expense account in an adjusting entry in your records. A debit increases an expense account. This matches this expense to the correct month.