How is accrued interest revenue recorded on financial statements?

• A. Debit Interest Revenue, Credit Interest Receivable
• B. Debit Interest Receivable, Credit Interest Revenue
• C. Debit Cash, Credit Interest Revenue
• D. Debit Interest Revenue, Credit Cash

Answer: (B)

Accrued interest revenue is earned but not yet received, so you record an asset and revenue to reflect the earned income. Debiting Interest Receivable (an asset) and crediting Interest Revenue (a revenue account) shows that the company has earned interest and expects to collect it. Revenue increases with a credit, and the receivable balance increases with a debit, which is why this entry is the correct one.

The other approaches would either try to increase revenue with a debit (which would reduce rather than increase revenue) or involve cash before it’s received. When cash is finally collected, you would Debit Cash and Credit Interest Receivable.