320 Interest Payable
Liabilities
Accrued
Synopsis
Account 320 is established to record amounts of Interest payable or accrued on loans held by the dealership.
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Debits |
Credits |
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Example 1
Record the accrual of floorplan interest for the current month in the amount of $9,183 of which $6,837 is for new vehicle floorplan interest and $2,346 is for used vehicle floorplan interest.
Journal: Standard Entries Journal
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Entry: |
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Debit |
Credit |
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Account 076-01 |
Interest Floorplan – New Vehicles Department |
$6,837 |
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Account 076-02 |
Interest Floorplan – Used Vehicles Department |
$2,346 |
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Account 320 |
Interest Payable |
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$9,183 |
Example 2
Record the accrual of interest on the real estate mortgage for the current month in the amount of $22,500.
Journal: Standard Entries Journal
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Entry: |
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Debit |
Credit |
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Account 086-01 |
Interest – Mortgages – New Vehicles Department |
$4,725 |
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Account 086-02 |
Interest – Mortgages – Used Vehicles Department |
$3,375 |
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Account 086-03 |
Interest – Mortgages – Lease & Rental Department |
$450 |
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Account 086-05 |
Interest – Mortgages – Mechanical Department |
$4,275 |
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Account 086-06 |
Interest – Mortgages – Body Shop Department |
$2,250 |
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Account 086-07 |
Interest – Mortgages – Parts & Accessories Department |
$4,050 |
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Account 086-09 |
Interest – Mortgages – General & Administrative |
$3,375 |
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Account 320 |
Interest Payable |
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$22,500 |
Example 3
Record the monthly mortgage payment that is due for the month in the amount of $38,051 of which $22,500 is interest due.
Journal: Cash Disbursements
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Entry: |
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Debit |
Credit |
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Account 335 |
Mortgages Payable – Real Estate |
$15,551 |
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Account 320 |
Interest Payable |
$22,500 |
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Account 202 |
Cash in Bank |
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$38,051 |
Comments
A credit balance represents unpaid interest which has accumulated on all interest-bearing obligations.