Accrued Income Adjustment in Final Accounts
Arjun EP
Adjustments given below trial balance must be adjusted for final account.
Adjustment entry means not adjusted while preparing trial balance.
It is also known additional information.
Almost all the adjustment entry effects dual aspect.
One is debit and other is credit.
There are a number of adjustments to be made while finalizing the financial statements.
But our discussion will be limited to the following adjustments (limited by the curriculum):
Major Adjustments in Final Accounts
|
Closing stock Outstanding expenses Prepaid expenses Accrued income or income receivable Unearned or prepaid revenue Depreciation on assets Appreciation on assets Written off or amortized Purchase or sale of fixed assets Bad debts, provision and discount Bad debts recovered |
Goods loss by fire and insurance claim Goods loss by fire and insurance claim Goods distribute as free sample Manager’s commission Bonus or pension to employees Create reserve or fund Goods sold on sale or return basis Hidden adjustment: (a) Interest on loan or debenture (b) Interest on investment (c) Monthly rent and salary |
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Accrued Income or Income Receivable
Accrued revenue is earned but not received.
It is also known as income receivable.
It is assume to receive in future.
It should be considered as receivable income for the year and recorded in asset.
It is based on accrual system of accounting.
The adjusting entry takes the following form:
ADJUSTMENT: 4
Interest received Rs 50,000 and still receivable or accrued Rs 20,000.
Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Cash account Accrued interest account To Interest earned account (Being- interest received and receivable) |
Dr Dr
|
|
50,000 20,000 |
70,000 |
P&L Account
|
Particulars |
|
Amount |
Particulars |
|
Amount |
|
|
|
|
To Interest received Add: Accrued interest
|
50,000 +20,000 |
70,000 |
Balance Sheet
|
Liabilities |
|
Amount |
Assets |
|
Amount |
|
|
|
|
Current assets: Accrued interest |
|
20,000
|
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