Unpaid expenses

Get ready!
0 Before you read the passage, talk about
these questions.
1 What are some expenses that a business
doesn't pay right away?
2 How do accountants record these expenses?

Sometimes
businesses must record an
expense, but don't have to pay it right
away. How do they keep track of these unpaid
expenses? They can account for them via two types
of payable accounts:
Income tax payable - Sometimes, a business owes taxes for a
certain year that are not due until the following year. The unpaid
amount is recorded in an income tax payable account and paid in
increments throughout the following year.
Accrued expenses payable - Businesses have to calculate and record
expenses for which they have not been billed:
• Unused vacation days that carry over to the following year
• Interest that isn't due until the end of a loan period
• Bonuses owed to executives and salespeople
These accruals are made throughout the year and recorded in an
accrued expenses payable account.

Reading
f) Read the textbook passage. Then, mark the following 0 Fill in the blanks with the
statements as true (T) or false (F). correct words and phrases
1 F_ Unused vacation days are lost at the end of the year. from the word bank.
2 T_ Income tax payable is settled via incremental payments.
3 F_ Accrued expenses payable carry over from year to year.
via bonus
income tax payable
Vocabulary accrued expense payable
Q Match the words (1-4) with the definitions (A-0). 1 Calculate this year's taxes and
1C _ bill 3 A_ carry over record the amount in income
___ tax
_
payable
2 B_ loan period 4 D_ accruals 2 Debt payments are made
_via
_ _ _ the cash account.
A to transfer an amount from one period to another
3 If salespeople reach their target,
B the length of time for repaying borrowed money bonus
they will get a(n) _ _ __
C a document stating what is owed 4 Unused vacation days must be
D amounts that are accumulated over time acrrued
recorded as a(n) _ _ __
expense
20 payable
0 g Listen and read the textbook passage Speaking
again. What should a company do with an
unbilled expense?
0 With a partner, act out the roles below
based on Task 7. Then switch roles.
USE LANGUAGE SUCH AS:
Listening
How do I know how much ...?
0 g Listen to a conversation between two
You don't actually have to know ...
accountants. Choose the correct answers.
How do you estimate ... ?
1 What is the dialogue mostly about?
A raising executive salaries
B recording an accrued expense Student A: You are an accountant. Talk to
C creating a new expense account Student B about:

D settling last year's expense accounts • bonuses

• estimates
2 According to the dialogue, bonuses are
• recording them
A the same every year
B given to accountants Student B: You are an accountant. Answer
C paid at the end of the year Student A's questions.
D estimated according to sales

0 g Listen again and complete the Writing

conversation.
0 Use the conversation from Task 8 to
complete the memo.
Accountant 1: Larry, could you help me, with
these expense accounts?
Accountant 2: Sure, Vicky, what's up?
Accountant 1: I need to know how to account for
bonuses.
Accountant 2: You mean the bonuses we pay to
executives
1 and salespeople ?
MEMO
TO: accountants
don´t pay them
Accountant 1: Right. We 2 _______ _
until the 3 end of the year
________ _ RE: bonuses
_ _....., so how do I know how
much they will be?
don´t actually have to_
Accountant 2: Well, you 4 ________ Bonuses are paid to salespeople and executives
___ know. I can give you at the end of the year. We account for this by
estimates.
Accountant 1: How do you estimate them?
last_
Accountant 2: I use the amounts of 5 _ year´s
_
bonuses as a guide.
______
Accountant 1: OK. 6 _that
__ makes
_ _sense
_ _ _ . But
the amounts vary every year, right?
Accountant 2: They do. The estimates won't be
7exactly accurate but that's not a
problem.
Accountant 1: So then, how do I record them?
Accountant 2: You need to record them in the
accrued expenses payable account.
21