illustration entries for loan and accrued interest

Loan Payable, Interest Accrual, and Repayment
Illustrative Entries

7-1-X1	Cash	100,000
	Loan Payable		100,000
	To record the borrowing of $100,000 at 6% per annum; principal and interest due on 12-31-X2

12-31-X1	Interest Expense	3,000
	Interest Payable		3,000
	To record accrued interest for 6 months ($100,000 X 6% X 6/12)

12-31-X2	Interest Expense	6,000
	Interest Payable	3,000
	Loan Payable	100,000
	Cash		109,000
	To record repayment of loan and interest (note that $3,000 of the total interest was previously accrued)

Note: The Notes Payable account could have been substituted for Loan Payable