# How to calculate accrued interest

## Journal Entries

The period-end procedure recognizing accrued interest is to debit the interest expense account and credit the interest payable account, which is a liability account. For example, suppose your company borrowed \$100,000 on Oct. 1 at an annual interest rate of 5 percent, payable quarterly. The annual interest expense is \$100,000 times 5 percent, or \$5,000. Every quarter, you accrue interest of \$1,250. Your end-of-period adjusting entry, dated Dec. 31, is to debit the interest expense account for \$1,250 and credit the interest payable account for \$1,250. You would repeat this procedure every quarter until you pay back the loan.

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Category: Bank