What is credited when interest is accrued on a long-term note payable?

When interest is accrued on a long-term note payable, the account that is credited is Interest Payable. This reflects the obligation that the company has to pay interest to the lender in the future. Accruing interest means recognizing the expense in the current accounting period when the interest cost is incurred, even though no cash has actually been paid out at that time.

By crediting Interest Payable, the company records a liability on its balance sheet, indicating that it now owes this interest to the creditor. This aligns with the accrual basis of accounting, which requires that expenses be recognized when they are incurred rather than when cash is paid.

The other options would not appropriately represent the accounting for accrued interest. For instance, Interest Expense would be debited to recognize the cost of borrowing but would not be credited as if it were a liability. Cash would only be credited when the actual payment is made, and Notes Payable pertains to the principal amount borrowed, not the interest that is accruing. Thus, the correct acknowledgment of the accrued interest is captured by the entry that credits Interest Payable.