Accrued interest on notes receivable is likely to be reported as a current asset such as Accrued Interest Receivable or Interest Receivable. The accrued interest receivable is a current asset if the interest amount is expected to be collected within one year of the balance sheet date.

I would expect that even a long-term note receivable that is due in five years will require that the interest on the note be paid quarterly, semiannually or annually. Hence the accrued interest will be a current asset.

If the interest on the note is not expected to be received within one year of the balance sheet date, then the accrued interest receivable should be reported as a long-term asset.

Learn more about Adjusting Entries.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

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