Hi! I'm sort of unable to understand how to go with this. So I'll appreciate your help very much. Thanks in advance!

We have a note payable of $30,000 due on Dec. 31, 2011. Interest on the note payable is 4 percent per year, payable monthly at the beginning of the following month. Interest was last paid on December 1, 2011 and was recorded properly at that time. The company signed the note on June 1, 2011.

I'll have to prepare the appropriate journal entry for this.I know I would have to debit interest expense but I'm not sure if I should credit interest payable or the note payable.

Thanks a lot once again!

Although it wouldn't be completely wrong to credit the Note Payable account for the accrued interest (in which case the NP account would serve as a statement of "combined principal and interest due" balance), the more common practice is to let the NP account remain at 30K until it's paid, and credit a separate Interest Payable account for the one month of accrued interest.