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In the General Journal, the transaction from 12/31/2016 Dr. Interest Expense $360 Cr.Interest...

Question:

In the General Journal, the transaction from 12/31/2016 Dr. Interest Expense $360 Cr.Interest Payable $360 Explanation E. Why the $360?

Interest Expense:

An interest expense is a non-operating expense. This is the amount paid periodically other than the principal amount in exchange for a loan. It is deducted after determining the operating income to get the net income of the company.

Answer and Explanation:

An adjusting entry has a nominal account and a real account. Here, there is an adjusting entry for the interest incurred at the end of a period. Interest is charged as an expense in the income statement. An interest may incur due to a loan borrowed by the company. Since there is a credit of interest payable, the interest is not yet paid by the company. Interest payable is a liability account.


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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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