5. The Accrual Principle and Income

Question 1

What is deferred income?

Answer 1

The receipt of income in arrears at the year (income is outstanding) and a current liability in the statement of financial position.

Question 2

What is the journal entry to record the deferred income?

Answer 2

Debit - Income account (Statement of profit or loss)
Credit - Deferred income (current liability on the statement of financial position)

Question 3

What is accrued income?

Answer 3

Income that has been received in advance of delivering the goods or service and is a current asset on the statement of financial position.

Question 4

What is the journal entry to record the accrued income?

Answer 4

Debit - Accrued income (current asset on the statement of financial position)
Credit - Income account (Statement of profit or loss)

Question 5

What is the accounting treatment for deferred income and accrued income?

Answer 5

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