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Accounting Treatment of Operating Income - Case 2: Accrued Income

Accrued income is earned income. It is income that has been generated by the organization but cash associated to that income is not yet received by the time the year comes to an end. Accrued income is classified as a current asset for it represents cash yet to be received by the business in the future.


By 31/12/2018, Our Co. ltd had actually received cash of $ 225,000 rent income. Assume rent income is usually $25,000 per month


i)Record the transactions in the rent income account

ii)Extract a P& L account at the end of the year 31/12/2018

iii)Extract a balance sheet as at 31/12/2018


Option one: Direct Accounting Approach



Option Two: Indirect Accounting Approach

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About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.