Accrued Income
Accrued income refers to those incomes which have been earned by the firm in the current accounting period but have not been received yet. Such types of income can be Interest on loan, rent received, commission, etc. So, following the accrual concept of accounting, these incomes are recorded in the year in which they are rendered by the firm and treated as an income for the firm.
Adjustment:
A. If Accrued Income is given outside the trial balance: In such case, two entries will be passed:
- Will be added to the related Income A/c in the Cr. side of Profit & Loss A/c.
- Will be shown in the Assets side of the Balance Sheet or added to the concerned source in the Assets side of the Balance Sheet.
B. If Accrued Income is given inside the trial balance: It will only be shown on the Assets side of the Balance Sheet.
Financial Statement with Adjustment with Examples-I
Through adjustments in the financial statement, we consider all the accounting items which are relevant to the current financial year, but not recorded in the books due to any reason or wrongly recorded. This helps us in getting the actual profit or loss for the year and the accurate financial position of the company. Five basic adjustments, like Closing Stock, Outstanding Expenses, Prepaid Expenses, Accrued Income, and Unearned Income are discussed below.