1. TASK: Insert the appropriate word in the text below:
Accounting – accrual – accurately – amount – assume – due
entries - included - incurred - interest – occur – owed – prior
Adjusting Entries 1
Adjusting entries are accounting journal __________ that convert a company's accounting records to the __________ basis of accounting. An adjusting journal entry is typically made just __________ to issuing a company's financial statements.
To demonstrate the need for an accounting adjusting entry let's __________ that a company borrowed money from its bank on December 1, 2016 and that the company's __________ period ends on December 31. The bank loan specifies that the first __________ payment on the loan will be __________ on March 1, 2017. This means that the company's accounting records as of December 31 do not contain any payment to the bank for the interest the company __________ from December 1 through December 31. (Of course the loan is costing the company interest expense every day, but the actual payment for the interest will not __________ until March 1.) For the company's December income statement to __________ report the company's profitability, it must include all of the company's December expenses—not just the expenses that were paid. Similarly, for the company's balance sheet on December 31 to be accurate, it must report a liability for the interest __________ as of the balance sheet date. An adjusting entry is needed so that December's interest expense is __________ on December's income statement and the interest due as of December 31 is included on the December 31 balance sheet. The adjusting entry will debit Interest Expense and credit Interest Payable for the __________ of interest from December 1 to December 31.
2. CHECK YOUR SPEAKING
|
accounting |
[ əˈkaʊn.tɪŋ ] |
обліковий |
|
accrual |
[ əˈkruː.əl ] |
нарахування |
|
accurately |
[ ˈæk.jʊ.rət ] |
точно |
|
amount |
[ əˈmaʊnt ] |
Сума |
|
assume |
[ əˈsjuːm ] |
Допускати |
|
due |
[ djuː ] |
підлягати оплаті |
|
entries |
[ ˈen.tri ] |
Реєстраційні записи |
|
included |
[ ɪnˈkluːd ] |
Включати |
|
incurred |
[ ɪnˈkɜːr ] |
понесений |
|
interest |
[ ˈɪntrəst ] |
відсоток |
|
occur |
[ əˈkɜː(r) ] |
відбуватися |
|
owed |
[ əʊ ] |
Бути винним |
|
prior |
[ ˈpraɪə(r) ] |
до |
3. SEE CORRECT ANSWER
Adjusting Entries 1
Adjusting entries are accounting journal entries that convert a company's accounting records to the accrual basis of accounting. An adjusting journal entry is typically made just prior to issuing a company's financial statements.
To demonstrate the need for an accounting adjusting entry let's assume that a company borrowed money from its bank on December 1, 2016 and that the company's accounting period ends on December 31. The bank loan specifies that the first interest payment on the loan will be due on March 1, 2017. This means that the company's accounting records as of December 31 do not contain any payment to the bank for the interest the company incurred from December 1 through December 31. (Of course the loan is costing the company interest expense every day, but the actual payment for the interest will not occur until March 1.) For the company's December income statement to accurately report the company's profitability, it must include all of the company's December expenses—not just the expenses that were paid. Similarly, for the company's balance sheet on December 31 to be accurate, it must report a liability for the interest owed as of the balance sheet date. An adjusting entry is needed so that December's interest expense is included on December's income statement and the interest due as of December 31 is included on the December 31 balance sheet. The adjusting entry will debit Interest Expense and credit Interest Payable for the amount of interest from December 1 to December 31.
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