Session 10 - Adjustment of Accrued Income

Session Plan : Adjustment of Accrued Income

Introduction (5 min): Explain meaning of accrued income and need for adjustments in final accounts.

Concept & Journal Entry (10 min): Show entry – Accrued Income A/c Dr. → Income A/c Cr.

Illustrations (15 min): Work out examples showing effect on P&L A/c and Balance Sheet.

Class Activity (10 min): Students practice adjustment problems on accrued income.

Recap & Q/A (5 min): Summarize treatment and clarify doubts.

2. Accrued Income

Definition: Income that has been earned but not yet received by the end of the accounting period.

Treatment:

Profit & Loss Account: Added to the respective income to reflect income earned but not yet received.
Balance Sheet: Shown as a current asset.

Journal Entry:

Accrued Income A/C Dr.

To Income A/C

Scenario: A company has earned ₹10,000 in interest income by year-end, which hasn't been received yet.

Journal Entry:

Accrued Income A/C Dr. ₹10,000

To Interest Income A/C ₹10,000

Impact:

Profit & Loss Account: Interest income is increased by ₹10,000, boosting net profit.
Balance Sheet: Accrued income is listed under current assets.

IFRS / Ind AS 18 on Revenue Recognition.

Case studies on misstatement of income due to non-recording of accrued income.

Research on timing differences in income recognition and earnings management.

Interest income ₹10,000 earned, but only ₹7,500 received. Pass journal entry and show treatment in final accounts.
Rent receivable ₹12,000, of which ₹9,000 received. Show adjustments in P&L A/c and Balance Sheet.

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