What is interest payable in accounting

What is Interest Payable? Interest Payable is a liability account, shown on a company's balance sheet, which represents the amount of interest expense that has accrued to date but has not been paid as of the date on the balance sheet. In short, it represents the amount of interest currently owed to lenders.

What is interest payable example?

Example of Interest Payable\n\n A business owes $1,000,000 to a lender at a 6% interest rate, and pays interest to the lender every quarter. After one month, the company accrues interest expense of $5,000, which is a debit to the interest expense account and a credit to the interest payable account.

Is interest payable A expense?

Comparing Interest Expense and Interest Payable\n\n First, interest expense is an expense account, and so is stated on the income statement, while interest payable is a liability account, and so is stated on the balance sheet.

What type of expense is interest payable?

Interest expense is a non-operating expense shown on the income statement. It represents interest payable on any borrowings—bonds, loans, convertible debt or lines of credit. It is essentially calculated as the interest rate times the outstanding principal amount of the debt.

Is interest payable accounts payable?

Liability accounts include interest owed on loans from creditors—known as interest payable, as well as any tax obligations accumulated by a company, which are known as taxes payable. These are not part of accounts payable. Debt owed to creditors typically must be paid within a short time frame, around 30 days or less.