When is interest payable recorded in accounting?

Interest payable is recorded in accounting when interest expense is incurred. This principle aligns with the accrual basis of accounting, which recognizes expenses when they are incurred, regardless of when the cash payment is made. When a company accrues interest, it recognizes the obligation to pay that interest in the future, which reflects in the financial statements as an expense that impacts profitability. Recording the interest expense at the time it is incurred provides a clearer picture of the company's financial position, as it allows for the matching of expenses with the revenues they help to generate during the same accounting period. This approach ensures that the financial statements accurately reflect the company’s financial performance and obligations, leading to better decision-making.