What is Accrued income | Example | Journal Entry

accrued income feature image

Accrued income means that income which is earned but yet not received By the Business enterprises. In other words, the income earned by the company by providing service to the other company or individual but payment for that service is still pending from the receiver of the services. 

According to the accrual principle of the accounting, The Incomes and expenses are recorded in the books of that financial year in which year they have actually earned or due. 

To find out the actual profit and loss of the business in a particular financial year we need to enter total expenses and incomes concerned with the same financial year. To calculate the total expenses and incomes we have to add the income due but not yet received into the income received during the year and expenses due but not yet paid into the expenses paid during the year. So That’s why accrual principle is accepted by almost all businesses and legal authorities of the country.

Examples of Accrued income:

  1. Rent earned but not yet received from the tenant for $/Rs 1,500/-.
  2. Insurance claims due but not yet received for $/Rs. 5,570/-.
  3. Commission on sale(selling any other business products) earned but not yet received $/Rs. 10,500/-.

Journal entry for Accrued income with the golden rule.

Journal entry for creating accrued income account: – 

Example:  01/02/2018 Rent earn but not received yet from the tenant for Rs 1,500/-.

So in this transaction, According to the first step of our treatment of business transaction with the golden rules of accounting, we find two accounts which are involved in the transaction. These are shown as follows.

  1. Accrued Rent A/c -> Representative personal A/c* -> Personal Rule -> Tenant using our cash for other propose. So, he is the receiver  -> Debit

  2. Rent received A/c -> Income A/c -> Nominal Rule -> Rent Earned -> Credit

The journal entry for the transaction is the following:

Date  Particulars  L.F. Debit  Credit  
01/02/18 Accrued Rent a/c                      Dr.   1,500  
  To Rent Received a/c     1,500
  (Being rent from the let out building due but not yet received)      
 
Journal entry for accrued income min - What is Accrued income | Example | Journal Entry
Journal entry for accrued income

Journal entry for Accrued income when Received: –

Example: 15/04/2018 Accrued Rent received from the tenant for Rs 1,500/-.

  1. Accrued Rent A/c -> Representative personal A/c* -> Personal Rule -> Tenant is paying cash -> he is the giver  -> Credit

  2. Cash A/c -> Assets  A/c -> Real Rule -> Cash received -> comes in -> Debit

The journal entry for the transaction is the following:

Date  Particulars  L.F. Debit  Credit  
01/02/18 Cash a/c                                   Dr.   1,500  
  To Accrued Rent  a/c     1,500
  (Being accrued rent received)      
 
Journal entry for accrued income Received min - What is Accrued income | Example | Journal Entry
Journal entry for accrued income – Received

Journal entry for Accrued income with the modern rule.

Journal entry for creating accrued income account: – 

Example: 01/02/2018 Rent earn but not received yet from the tenant for Rs 1,500/-.

So Now we will treat this same transaction with the Modern rules of accounting shown as following.

  1. Accrued Rent A/c -> Asset A/c -> Asset Rule -> Increase in asset  -> Debit

  2. Rent received A/c -> Income A/c -> Income Rule -> Increase in income -> Credit

The journal entry remain same as above:

Date  Particulars  L.F. Debit  Credit  
01/02/18 Accrued Rent a/c                      Dr.   1,500  
  To Rent Received a/c     1,500
  (Being rent from the let out building due but not yet received)      
 
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Journal entry for accrued income min - What is Accrued income | Example | Journal Entry

Journal entry for Accrued income when Received: –

Example: 15/04/2018 Accrued Rent received from the tenant for Rs 1,500/-.

  1. Accrued Rent A/c -> Representative personal A/c* -> Personal Rule -> Tenant is paying cash -> he is the giver  -> Credit

  2. Cash A/c -> Assets  A/c -> Real Rule -> Cash received -> comes in -> Debit

The journal entry for the transaction is the following:

Date  Particulars  L.F. Debit  Credit  
01/02/18 Cash a/c                                   Dr.   1,500  
  To Accrued Rent  a/c     1,500
  (Being accrued rent received)      
 

Journal entry for accrued income Received min - What is Accrued income | Example | Journal Entry

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