Notes Payable Adjusting Entry – Adjusting Journal Entry for Notes Payable

Adjusting journal entry for notes payable will discuss options for setting up a system for recording notes payable in an accounting system. Adjusting entries are entries made at the end of an accounting period, at the end of a month or year. Adjusting entries are planned entries. When entering payments for an installment not we have some options to make the system easier. To keep the loan balance correct at all times we should record interest and principal portions of each payment, but this requires a different journal entry each payment. If we want to standardize the payment we could allow the accounting department to credit cash and debit the loan payable, the result being that we allocate too much to loan payable and do not record interest expense at the time of payment. The adjusting entry can then be used to adjust the loan and the interest expense to the proper amount.
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