Interest Received Journal Entry

A company might receive interest from making a loan, purchasing an interest-bearing investment, or from having an interest-bearing bank account. In each situation, the company must (1) record interest revenue when interest is earned and (2) increase the cash account when interest is received.
If the interest is earned and cash is received at the same time, then the company can simply debit the cash account and credit interest revenue (or interest income).
If the interest is earned BEFORE the cash is received, then the company must debit interest receivable (because the cash hasn't been received yet) and credit interest revenue. Later, when the cash is collected, the company can debit the cash account and credit interest receivable.
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[@tofulosophy]

Great video! I love you simple and straight forward teaching style.
Question: this is for an accrual based company, correct? If the company were cash based, we would make one entry on December 31 to account for the interest earned right?

[@leventenemeth49]

Yes, it's enough to make an entry when cash is actually received, that's why it's much easier to account for cash based companies, But for companies following gaap they have to periodically account for the earned interest like in the video, ususally quarterly.