What is Accrued Income? Give Examples

Income of the current year which is still to be received by a business is known as accrued income. These are the incomes which a business earns during the current year but are not received in the same year. In short, these incomes are earned in the current year but are received in the next accounting year. These incomes are also known as Outstanding Income or Income Receivable or Incomes earned but not received.

For example, rent is to be received Rs 2,000 per month. During the year rent received Rs 22,000. In this case, rent for one month i.e. Rs 2,000 is still to be received. Thus, the amount of Rs 2,000 is considered as outstanding rent or rent receivable.

When Accrued Incomes are given outside the Trial Balance
Generally, the information related to the accrued income is given outside the Trial Balance.

Treatment of Accrued Income in the final accounts is as follows.

Firstly, outstanding incomes are shown on the credit side of the Profit and Loss Account as an addition to the concerned income.

Secondly, it is shown on the Assets Side of the Balance Sheet under the head Current Assets. It is considered an asset because it is an income of the business which is still to be received.

When Accrued Incomes are given inside the Trial Balance

There may be a situation when accrued incomes are given inside the Trial Balance. In such a case, these incomes are
already adjusted in the concerning incomes. Therefore, there is no need to show them in the Profit and Loss Account.
These are shown only on the Assets side of the Balance Sheet.


Also, Read

What is Operating Profit?

Operating Profit can be defined as the profit earned by carrying the normal business activities. It is computed by subtracting the operating expenses from the gross profit.

Balance Sheet

The balance sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period

Profit and Loss Account

A profit and Loss Account is the second financial statement prepared by an organization. This account is prepared to ascertain the net results of a firm in form of net profit earned or net loss incurred during an accounting period.

What are Adjusting Entries?

In order to incorporate adjustments in the financial statements, we pass the required Journal entries, which are termed as adjusting entries.