Which of the following best describes an interest payable account?

An interest payable account is best described as a liability account that records interest owed but not yet paid. This type of account captures the amount of interest that a company has incurred on its debts but has not yet settled with the creditor. It reflects an obligation that the company needs to pay, which is key to liability accounting.

When a company borrows money, it often has to pay interest. Even if the payment has not yet been made, it is still a liability because the obligation to pay exists as soon as the interest accrues. Recognizing interests payable on the balance sheet helps stakeholders understand the company’s financial commitments and is crucial for accurate financial reporting.

This understanding distinguishes it from other types of accounts mentioned in the options. For instance, an account that records future income from interest would be described as an asset or a different type of income account rather than a liability. Likewise, an asset account representing earned interest and a temporary account used to track interest income would involve different classifications that do not align with the characteristics of interest payable. Thus, the definition of interest payable directly ties it to liabilities, affirming that it is indeed a record of amounts owed.