To adjust the transaction for accrued interest expense on the loan payable, you need to recognize the expense that has been incurred but not yet paid. This is typically done at the end of an accounting period to ensure that the financial statements accurately reflect the company's financial position.

Here's a step-by-step guide on how to adjust the transaction:

1. Determine the interest rate: Start by determining the interest rate on the loan payable. This information should be available in the loan agreement or any related documentation.

2. Calculate the accrued interest expense: To calculate the accrued interest expense, you need to determine the amount of interest that has accrued since the last interest payment. This is calculated by multiplying the outstanding loan balance by the interest rate and the time period since the last interest payment.

   For example, let's say the loan payable has a balance of K10,000 and the interest rate is 5% per annum. If the last interest payment was made three months ago, the accrued interest expense would be calculated as follows:

   Accrued Interest Expense = K10,000 * 5% * (3/12) = K125

   Therefore, the accrued interest expense on the loan payable is K125.

3. Debit interest expense: Debit the interest expense account for the amount of accrued interest expense. This recognizes the expense in the income statement.

   In this example, you would debit the interest expense account for K125.

4. Credit accrued interest payable: Credit the accrued interest payable account for the same amount. This records the liability on the balance sheet.

   Continuing with the example, you would credit the accrued interest payable account for K125.

5. Update the loan payable balance: Adjust the loan payable balance by adding the accrued interest expense to the outstanding loan balance.

   Using the example, the loan payable balance would increase from K10,000 to K10,125.

It's important to note that the specific accounts used may vary depending on the company's chart of accounts and accounting policies. It's always recommended to consult with a professional accountant or refer to the company's accounting guidelines for accurate adjustments.

References:

• Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 470-10-25: Accrued Interest
• Investopedia: Accrued Interest