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The Corporate Finance Institute Accounting
Example Journal Entries:
To recognize deferred revenue:
DR Cash: 1,000
CR Deferred Revenue: 1,000
When services have been provided:
DR Deferred Revenue: 1,000
CR Revenue: 1,000
Interest Payable
Interest Payable is a liability account shown on a company’s statement
of financial position and represents the amount of interest expense that
has been incurred to date, but has not been paid as of the company’s
date on the balance sheet. For example, if an interest of $1,000 on a
note payable has been incurred but is paid in the next fiscal year, for
the current year ended December 31, the company would record the
following journal entry:
DR Interest Expense: 1,000
CR Interest Payable: 1,000
Interest payable amounts are usually current liabilities and may also be
referred to as accrued interest. These accounts can be seen in multiple
scenarios, whether it be for bond instruments, lease agreements
between two parties, or any note payable liabilities.
Interest Payable in Bonds
Interest payable accounts are commonly seen in bond instruments
because a company’s year end may not coincide with the payment
dates. For example, let’s say that XYZ Company issued 12% bonds on
January 1, 2017 for $860,652 that have a maturity value of $800,000.
The yield is 10%, the bond matures on January 1, 2022 and interest is
paid on January 1st of each year.
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