Impact of Interest Expense on the Balance Sheet
During the year, you paid the bank the $5 interest expense on your loan. Accordingly, your cash balance was reduced, along with the retained earnings account. Note that there was no impact on the debt balance because you have not paid down any principal.
| Debits | Credits | |
|---|---|---|
| Interest expense (SE): | $5 | |
| Cash (A): | $5 |
Get Crash Course in Accounting and Financial Statement Analysis, Second Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
