Page 75 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Balance sheet as on dated…………………..
Liabilities Assets
Dividend Outstanding 3,500
3,500

4. For Unaccrued Incomes or income received in advance of the Business
Income received in advance: Sometimes, traders receive certain amounts during a particular
trading period which are to be earned by them in future periods.
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.
March 31: Interest received in advance 1,500 from Mr. Kandhan; total amount of interest
received 6,500.
Total amount of interest received in a year
= Total actual interest received – Amount of the interest received in advance
= 6,500 – 1,500 = 5,000

Journal entry for the first transaction for the entire receipt of interest amount 6,500:
March 31 Cash A/c Dr 6,500
To Interest A/c 6,500
(Being the amount interest received)

Journal entry for the amount of interest received in advance from Mr. Kandhan amounted
1,500:
March 31 Interest A/c Dr 1,500
To interest in Advance 1,500
(Being the amount of received interest in advance treated as liability)

How many number of accounts are involved in this transaction ?
1. Cash A/c
2. Interest A/c

3. Kandhan A/c
Dr Interest Cr
Date Particulars Date Particulars
To Interest in Advance 1,500 March 31 By Cash 6,500
To Balance c/d 5,000
6,500 6,500
By balance b/d 5,000

70 LOVELY PROFESSIONAL UNIVERSITY