Year-end · Level: Exam specials
Journal entry: Interest owed at year end
The expense belongs to this year but is paid in January, so it is booked against Accruals at 31 December.
Worked example
Loan interest of £1,470.00 for December will only be debited on 15 January. Book the adjustment at 31 December.
Correct journal entry
Interest expense £1,470.00 / Accruals £1,470.00
Debit
Interest expense£1,470.00
Credit
Accruals£1,470.00
Why?
- Interest expense: expense incurred → debit
- Accruals: liability increases → credit
Calculation
- The expense belongs to this year even though it is paid next year.
Typical mistake
Booking the interest only when it is paid next year.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
Loan interest of £920.00 for December will only be debited on 15 January. Book the adjustment at 31 December.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for interest owed at year end?
Example: Interest expense £1,470.00 / Accruals £1,470.00.
How do I recognise this case?
The expense belongs to this year but is paid in January, so it is booked against Accruals at 31 December.
What is the typical mistake?
Booking the interest only when it is paid next year.