Interest due but not received journal entry is Interest Receivable(Asset) Account Debit Because increases the interest receivable account, reflecting the amount of interest earned but not yet received,Credit to Interest Income Account Because increases the interest income account, reflecting the recognition of interest earned during the period. When interest is earned but not yet received, it needs to be recorded as accrued interest. This ensures that the revenue is recognized in the correct accounting period, even though the cash has not yet been received.
Key Concepts
- Interest Receivable Account: The account representing interest earned but not yet received.
- Interest Income Account: The account representing the interest earned during the period.
Journal Entry for Interest Due but Not Received
Example Scenario
Assume a company earns interest of ₹5,000 on an investment on 30-11-2023, but the interest will be received in the following month.
Step-by-Step Journal Entry
- Record the Accrued Interest
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 30-11-2023 | Interest Receivable | 5,000 | Interest earned but not received | |
| 30-11-2023 | To Interest Income | 5,000 | Recognition of earned interest |
Explanation
- Debit to Interest Receivable: This increases the interest receivable account, reflecting the amount of interest earned but not yet received.
- Credit to Interest Income: This increases the interest income account, reflecting the recognition of interest earned during the period.
Conclusion
Accurately recording interest due but not received is essential for maintaining precise financial records and ensuring correct revenue recognition. Properly managing these transactions ensures that the business’s receivables and income are accurately represented in the financial statements, contributing to better financial management and reporting.