reference green light query

Lorenzo
Lorenzo Registered Posts: 4
At the end of an accounting period, a sole trader realized that he had received some rental income in advance relating to the next period. What is the double-entry required to adjust for this?
Dr rental income Cr other payables
Dr other payables Cr rental income
Dr rental income Cr other receivables/ surely this should be other receivable i.e other income? i.e revenue
Dr other receivables Cr rental income



Explanation of the correct answer:
To the extent that income is received in a current period that relates to the following period, it must be removed from the income which is shown in the Income Statement for the current period. As income is a credit balance, a debit entry will be required to the account to remove the income received in advance. This is deferred income, and the credit entry will be to other payables, which is shown as a current liability in the Statement of Financial Position.

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