Accrued
income is a sundry income amount outstanding and yet to be received by the end
of an accounting period, so has not been entered into the ledger accounts.
In accounting for accrued income, the effect that needs to occur will be to increase the relevant income in an attempt to account for the total income due to the business in that accounting period and then to increase the asset- accrued income which is like debtors in that accounting period, recognising that the business is owed that amount.
Example:
You
are working on the accounting records of a manufacturing business for the year
ended 30 June 20X6. You are looking at the rental income for the year and this
shows receipts for the following periods:
July
20X5 – March 20X6 |
£990 |
July
20X5 – December 20X5 |
£1,068 |
Calculate the value of the adjustment required
for the rental income account as at 30 June 20X6 and show the journal entry
needed for the relevant adjustment.
Solution:
|
|
Accrued income |
July
20X5 – March 20X6 |
£990 |
£990/9x3= £330 |
July
20X5 – December 20X5 |
£1,068 |
£1068/6x6=£1068 |
Total
accrued income adjustment needed |
|
£1068+£330=£1398 |
Account name |
Amount
(£) |
Dr/
Cr |
Accrued income |
1,398 |
Dr |
Rental income |
1,398 |
Cr |
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