When a company borrows money by taking out a loan, the borrower debits the cash account (an asset) and credits either loan payable or note payable (a liability). The lender would debit loan receivable and credit the cash account.

When interest is accrued on the loan, the borrower must record interest expense and credit interest payable (or credit the cash account if the interest is paid immediately). The lender would debit interest receivable (or the cash account) and record interest revenue.

When the loan is repaid, the borrow should (1) record interest expense for the final period, (2) debit interest payable for any previously unpaid interest, (3) debit loan payable, and credit the cash account.
—
Edspira is the creation of Michael McLaughlin, an awardwinning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a highquality business education freely available to the world.
—
SUBSCRIBE FOR A FREE 53PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44PAGE GUIDE TO U.S. TAXATION
• A 75PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
* http://eepurl.com/dIaa5z
—
SUPPORT EDSPIRA ON PATREON
*  / prof_mclaughlin  
—
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSETLIABILITY MANAGEMENT
* https://edspira.thinkific.com
—
LISTEN TO THE SCHEME PODCAST
* Apple Podcasts: https://podcasts.apple.com/us/podcast...
* Spotify: https://open.spotify.com/show/4WaNTqV...
* Website: https://www.edspira.com/podcast2/
—
GET TAX TIPS ON TIKTOK
*   / prof_mclaughlin  
—
ACCESS INDEX OF VIDEOS
* https://www.edspira.com/index
—
CONNECT WITH EDSPIRA
* Facebook:   / edspira  
* Instagram:   / edspiradotcom  
* LinkedIn:   / edspira  
—
CONNECT WITH MICHAEL
* Twitter:   / prof_mclaughlin  
* LinkedIn:   / profmichaelmclaughlin  
—
ABOUT EDSPIRA AND ITS CREATOR
* https://www.edspira.com/about/
* https://michaelmclaughlin.com