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Sometimes income of the current year may be due but not received just as expenses due but not paid. For example, the firm advanced a loan of $ 20,000 at 12% interest on January I, 2004.Interest on this loan for the month of November and December are accrued, i.e., still to be received. In this case $400, i.e., 20000 *12/100 * 2/12 will be accrued interest. In the same way, if a portion of the building has been sublet on a monthly rent of  $ 700. One quarter’s rent (three months, rent) has not. been received so far $ 700 * 3 = $ 2, 1 00 will be accrued income as rent.

Treatment in the Final Accounts

(i) If accrued income is in adjustment. Accrued income is the income of the current year. The income has not been received so far, but it will be treated as income according to our accrual concept. It will be added to the concerned income at the credit side of profit and loss account and also shown at the assets side, because the amount is to be received by the current year. Journal entry for accrued interest and rent as mentioned in the example will be passed as under:

The treatment of accrued income will be made in the profit and loss account and balance sheet as under:

Profit and Loss Account                                                                   Balance Sheet 

(ii) If accrued income appears in Trial Balance. Accrued income will be shown at the assets side only because current year’s income is still receivable (whatever is receivable is an asset). As items from Trial balance are shown at one place only, so it is enough to show it at the assets side.