Page 186 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes Solution:
Rent for 9 months @ 2,000/- p.m.
Total Rent = 2,000 × 9 = 18,000
Journal Entry at the end of accounting year

Date Particulars L.F. ( ) ( )
31.3.2011 Earned Rent A/c Dr. 18,000
To Rent A/c 18,000
(Rent accrued for 9 Months)

In the above case Earned Rent is a personal account and Rent (Income) is a nominal A/c.
Rent A/c
Dr. Cr.
Date Particulars J.F. ( ) Date Particulars J.F. ( )
31.3.11 To P & L A/c 18,000 31.3.11 By Earned Rent A/c 18,000

Earned Rent A/c
Dr. Cr.
Date Particulars J.F. ( ) Date Particulars J.F. ( )
31.3.11 To Rent A/c 18,000 31.3.11 By Balance c/d 18,000

Balance Sheet (as on 31.3.11)
Liabilities ( ) Assets ( )
Accrued Interest 18,000

4. For Unaccrued Incomes of the Business

Sometimes the Business receives some incomes though not yet due. This is as per terms of
the contract. Such Incomes are rent received in advance or interest Received in advance etc.
For example business premises are let out by the owner to a tenant on the condition that
rent for the year is to be paid in advance though it is not due if accounts are prepared
during the period of receipt of rent then adjusting entry is also to be passed so that we may
get accurate results.
Relating Income Account Dr.

To Unaccrued Income Account
Unaccrued incomes are disclosed in the liability side of the Balance Sheet and subtracted
from the relating incomes in the credit side of the Trading and Profit & Loss Account.

Illustration 12: M/s ABC takes deposits on the basis of Hundies, on which interest is generally
paid in advance, which are matured on the expiry of stipulated periods. Mr. Pankaj has given
20,000 to the firm for deposit against Hundi for a period of 1 year rate of interest is 15%- Date of
issue 01.09.10. Accounts are closed on 31st March, 2011 by Mr. Pankaj pass the necessary journal
entries to give its effects and prepare ledger accounts and show its effects how this would appear
in the Balance Sheet of Mr. Pankaj as on 31st March, 2011.

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