Tuesday, 8 February 2022

Accrued Income

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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