This is income, or a part of income, which is receivable during a financial period, but is not yet received as at the end of a financial year.

- The income account must be adjusted to reflect the income that should have been received for 12 consecutive months or accounting periods or reporting dates.

- The amount by which the income account is outstanding will increase the amount of the income at the end of the financial year. At the end of the financial year a current asset is created - Accrued income, because the amount of the income is owed to the business.

To Identify and Calculate Outstanding (Accrued) Income:

The bank will credit the interest for the two months (January and February) during March. The interest on the fixed deposit is calculated at 10% per annum and an amount of 3000 interest should have been received for the year. Interest was already received to the amount of 2500.

The income account reflects interest received for ten months as at the end of the financial year. But as two months interest will be received in the new financial year in respect of the current financial year, it is a current asset.

The interest receivable for two months must be recorded to reflect the correct income for the financial year.

To have the correct income reflected in the financial statements, the interest not yet received for the current period must be recorded in the income account and transferred to the accrued income account.

Identify the account, and calculate the accrued or outstanding income. For example, after analysing the pre-adjustment trial balance, it is discovered that the interest income is reflected as 2500.

This interest represents the interest that has been received on a fixed deposit for the months of March to December. The bank will credit the interest for the two months (January and February) during March. The interest on the fixed deposit is calculated at 10% per annum and an amount of 3000 interest should have been received for the year.
- The income of 500 needs to be transferred to the Accrued / Outstanding Income Account.

To Adjust Outstanding (Accrued) Income:

1. Click on the Batch Entry icon, or click on the Input→Batch Entry menu option.
   - Keyboard Access: Press the F2 key on your keyboard. Alternatively, you may press the Alt+I+B keys on your keyboard.
   The Batch Type Selection screen will be displayed.
2. Select the General Journal.
3. Click on the Open button. The Batch Entry Transaction screen for the General Journal will be displayed.
   - If the correct contra account is not displayed on the Batch Type Selection screen, or if you have not yet set the batch up; or if your requirements should change, click on the F10: Setup icon, or press the F10 key on your keyboard.
   - It is recommended that the Amount Entry field be set to allow both (debit and credit).
4. Enter the transaction in the batch. After entering the transactions in the general journal, the transactions are as follows:
   
   - Since no Tax is applicable to these transactions, you may select to hide the tax column, Exclusive and Inclusive icons, as well as the lookup facility in the Setup Options for the General Journal, as in this example.
   - It is not necessary to balance the batch, if you have entered debit transactions for the same amount as for credit transactions, the net total of all transactions (debits minus credits) and the reference total for the entire batch (journal) should be zero.
5. Click on the F9: Process icon, or press the F9 key on your keyboard, to change the alias.
   - This will help you if you wish to identify a specific batch to generate a batch type report, or if you wish to export posted batches to a file.
6. Click on the F8: List icon, or press the F8 key on your keyboard, to list the batch.
   - It is a good idea to list the batch, and check the entries on the batch thoroughly. If there are any errors, you may edit the batch before posting it.
7. Click on the F6: Post icon, or press the F6 key on your keyboard, to post (update) the batch to the ledger.

After posting the transactions the T-Account View of the transactions should reflect as follows:

1. Income Statement Accounts:
   
2. Balance Sheet Accounts:
   
   

The income accounts will result that the net profit be increased with the income of 500 which is not yet received as at the end of the financial year (28/29 February). It has also increased the current assets, as it is an income, which will be received for the new financial year.

An income of 3000 will be recognised as income and not 2500. It has affected the profit in the previous financial year but will have no effect on the profit in the new financial year.

- Debits - Assets = Credits - Income

— digidan 2006/11/03 06:50