🏦Accruals
Interest Expense Accrual Journal Entry
Accrue interest incurred but not yet paid.
Scenario
Loan principal $120,000 at 6% annual, month-end accrual required.
Journal Entries
Monthly interest = 120,000*0.06/12 = $600.
| Account | Debit | Credit |
|---|---|---|
| Interest Expense | $600 | |
| Interest Payable | $600 |
Explanation
Accrue borrowing cost in period incurred regardless of payment date.
Variations
Reverse entry at next period start if policy requires.
Common Mistakes to Avoid
- ✗Booking expense only on payment date.
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Common questions about this journal entry
Cash hasn’t been paid yet.
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