Thursday, July 2, 2009

Interest payable

Interest the cost of borrowing accrues with the passage of time. When companies enter into long term financing agreements, they may become committed to paying large amounts of interest for many years to come. At any balance sheet date, however, only a small portion of this total interest obligation represents "liability".
You must remember, liabilities arising from past transaction or events. Therefore, the only interest obligation which represents a "liability" is the unpaid interest which has already accrued. (at the end of each period , any accrued interest payable is recorded by debiting interest expense and crediting interest payable.)

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