FRA Accrued Interest

Cathie

Hi, I'm new here.

I have just completed my simulation and I didn't pass because I need to answer further questions. I have been told that I will be asked a question on calculation of accrued interest. I can't seem to find anything in my books about this. I would appreciate any help please.

Cathie

Kinga1989

I think you might mean accrued income which might include interest receied and therefore you can call it accrued interest.
Basically some businesses have sundry types of income despite of sales. e.g. rent received or interest.
Similarly to normal expenses you might be required to adjust for prepayments/accruals regarding to this sundry income.

Accrued income - income earned but not yet received:

Dr Accrued Income (debtor - current asset in B/S)
Cr Sundry Income (e.g interest received)


Prepaid income - income received in advance

Dr Sundry Income (e.g interest received)
Cr Prepaid Income (Creditor - current liability in B/S) because you received income in advance which is not related to this period so you need to decrease the income)

I am not sure if that helps. I dont think I could be a teacher

Cathie

Yes that does help. Thanks very much.

Cathie