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Adjustments and the Matching Principle
Quick questions on Accrued and prepaid income explained: O-Level Principles of Accounts
6short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is accrued income?Show answer
Accrued income is income earned but not yet received at the year end (for example, rent due from a tenant that has not arrived). It belongs to this year:
What is income received in advance?Show answer
Income received in advance (prepaid income) is income received but not yet earned (for example, a tenant who has paid next year's rent early). It does not belong to this year:
What is working through the income account?Show answer
The income account is balanced so the transfer to the income statement is the balancing figure on the debit side (because income is a credit balance). Accrued income is a debit balance c/d (an asset); income received in advance is a credit balance c/d (a liability).
What is q1?Show answer
State how accrued income and income received in advance each appear in the statement of financial position. [2 marks]
What is q2?Show answer
Rent received is \7,000\ is still owed to the business at year end (accrued), with no opening balance. State the income statement figure. [2 marks]
What is q3?Show answer
Explain why income received in advance is not recognised as income this year. [2 marks]
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