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What is accrued Income?

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An income which is due but not received on the date of closing the books is known as accrued income. For example,when the books are closed on 31st march March 2016,Interest on certain securities has fallen due. 2500. But the  interest received is only 2000; So the accrued  interest amounts to 500.Before the books are closed,the income account should be credited with this additional 500,and an asset account should be debited with the income receivable.The adjusting journal entry will be made as follows.

Journal Book
Date Particulars LF Debit Credit
31/03/2016 Accrued Interest————–Dr 500
To; Interest Account 500
(To record the asset and income of accrued interest on investment)

After posting this entry,two accounts are affected will appear as follows:

INTEREST A/C
Date Particulars Folio No Amount Date Particulars Folio No Amount
By,cash ( interest so far received) 2000
31/03/2016 ,, Accrued Interest 500

The balance of this 2500,now shows the total interest income for the year and will be credited to profit and loss account.

ACCRUED INTEREST A/C
Date Particulars Folio No Amount Date Particulars Folio No Amount
31/03/2016 To; Interest A/c 500

The balance in this account represents and asset at the end of the year and will be shown on the asset side of the Balance sheet.

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