Page 160 - Account 10

any head of expense. Mostly, it happens because of the difference in the fiscal year. The
expense in extent to the pre-paid amount should be deducted from the concerned head in
trading or profit and loss A/c and shown the same in the assets side of the balance sheet.

If T/B Assets side of B/S
If in adjustments i. Assets side of B/S
ii. Dr. side of T/P/L account less from
respective expenses

iv. Accrued Income
Accrued income refers to the income, which is related with the current accounting
year but not yet received. It is also, termed as outstanding income or income earned but
not received or income receivables etc. It should be credited in profit and loss A/c and
shown in the assets side of balance sheet.

If T/B Assets side of B/S
If in adjustments i. Assets side of B/S
ii. Cr. side of P & L a/c and on related income head

v. Unearned Income/Advance income
When an income of the coming accounting year is received during the current
accounting year, it is known as unearned income. It should be deducted from the
concerned income head in the credit side of profit and loss A/c and should be shown in
liabilities side of the balance sheet.

If a advance income Liability side of B/S
is given in T/B

If advance income is i. Liability side of B/S only
given in adjustment ii. Cr. side of profit and loss account, less from
related income head

vi. Depreciation

Depreciation is a gradual loss or reduction in the value of a fixed asset due to its
constant use, wear and tear, obsolescence, etc. It is an expense but of non-cash nature. It
is charged in the profit and loss A/c on debit side in each year and the same is deducted
from the concerned asset in the balance sheet.

If in T/B Profit and loss account Dr. side
If in adjustment i. Dr. Side of P and L account
ii. Assets side of B/S less from respective assets

160 Aakar’s Office Practice and Accountancy - 10 Final Accounts 161