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Why would a company debit Interest Receivable? Multiple choice question. It paid interest for amounts incurred in an earlier accounting period. It received an interest payment for amounts accrued in an earlier accounting period. It owes interest on its notes payable which will be paid in a later accounting period. It generated interest on its notes receivable which will be collected in a later accounting period.

Sagot :

It generated interest on its notes receivable which will be collected in a later accounting period.

What are debit interest receivables?

  • The entry is a debit to the cash account and a credit to the interest receivable account when the actual interest payment is received, which eliminates the balance in the interest receivable account.

What is the accounting period?

  • In bookkeeping, the time frame for which management accounts and financial statements are created is known as an accounting period.
  • The accounting period in management accounting varies greatly and is chosen by management.
  • Accounting periods are frequently monthly.
  • The honored note is recorded by debiting cash for the amount paid by the customer, crediting notes receivable for the note's principal amount, and crediting interest revenue for the interest generated, presuming no adjustment entries have been made to accumulate interest income.

Therefore, a company will debit interest receivable because It generated interest on its notes receivable which will be collected in a later accounting period.

Know more about interest here:

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