Accrued Income Definition – Example | Balance Sheet Treatment

0
37
accrued income definition

Accrued Income Definition and Balance Sheet Treatment

Accrued Income Definition – “Income that has been earned but not yet received”

According to realization concept of accounting, an income is recorded in the books of account when it is earned not when is received. This term also follow this concept of accounting. Therefore, accrued income records in the books of account in the month in which it is earned.

The Journal entry for the Accrued Income is given below –

ParticularsDebitCredit
Income Accrued  A/c                    Debit
            To Income A/c

Accrued Income in Income Statement

It does not appears in Income Statement. Instead the income that s credited to record accrued income is shown in this financial statement.

Accrued Income in Balance Sheet

It appears on the Asset side of the Balance Sheet under the head current assets. This is because business has already earned the income that it will receive in the future. So it act as a current asset.

Accrued Income Example

To get a clear understanding of accrued income definition, let’s look at a very simple example.

XYZ Ltd is in laundry business. company has provided its service but yet not receive any payment of Rs 50,000 from one of its clients. So the nature of this income is accrued. Now the entry of this transaction the the companies books of account will be –

ParticularsDebitCredit
Accrued Income A/c                     Dr.50,000
            To Income A/c50,000

Related Financial Terms of Abnormal Cost

LEAVE A REPLY

Please enter your comment!
Please enter your name here