[sweetsandmore]

The first two months of opening the business the amortization schedule has interest of
$708.33 and 585.25, while the first note payable was due on the 3rd month.
After I input the first month of interest:

Interest Expense $708.33
Interest Payable $708.33

Do we reverse this at the end of the first month to zero out the interest and then input the second months interest:

Interest Expense $1,255.90
Interest Payable $1,255.90

2nd question

When I input the invoice for the 3rd month, which is the first month that we have to pay the note what account do I post the 2nd debit to?

Interest Expense $1,266.37
Principal $ 715.89 So, this debit to principal is it correct?
Note payable $ 1,982.26

[morgaine300]

Interest Expense $708.33
Interest Payable $708.33

Do we reverse this at the end of the first month to zero out the interest and then input the second months interest:

Interest Expense $1,255.90
Interest Payable $1,255.90

This is going to depend on whether you're actually closing out the books each month. As a general rule, that is not done. Meaning that this would work, but does not have to be done this way. I personally find this a more difficult way to do it.

The entire purpose of doing reversing entries is so that when the time comes to make the payment, you do not have to keep track of or calculate how much interest is already in the payables and how much is new expense in the payment month. Doing what you are doing is just creating extra work -- having to then go back and see what the first month was and add it to the second month -- it's kind of defeating the purpose of doing a reversing entry, in my opinion. If you're keeping track of what the first month is anyway, why not just keep it in the payable, do only 585.25 for the second month, and then when the payment is made, know that there's 1255.90 already recorded and in the payable.

When I input the invoice for the 3rd month, which is the first month that we have to pay the note what account do I post the 2nd debit to?

Interest Expense $1,266.37
Principal $ 715.89 So, this debit to principal is it correct?
Note payable $ 1,982.26

I don't have any idea what the note was for to begin with, so I can't comment on your dollar amounts, and I don't read yellow.