It is a common fact that when a business is dealt with, there are a number of financial aspects that are to be kept in consideration. Not only are there are certain unpaid expenses or dues, but there are certain accrued expenses as well.
There occur certain cases when income of a particular year that is being considered in present times is due but have not been paid. It is under such state of affairs that issue of outstanding expenses is taken into concern.
Example: It is stated that a particular company forwarded an amount of $20,000 at the rate of 12% on January 1. 2005. While calculating the interest, it can be seen that interest for the months of November and December still have to be paid. So, this can be stated as accrued expenses that are still to be received.
Position in Final Account
There are two positions wherein this accrued expenses may be placed in the Final Accounts.
- Accrued income placed in adjustments:
Since it is taken that accrued income is income of the current year hence in spite of it not being received till date, it would be still taken as accrued income. Taking into account the profit and loss side of the Balance Sheet, this is added to concerned income on credit side and is also shown on assets side. Amount in this case is to be received during the current year hence has a certain amount of value associated with it.
- Accrued income appears in Trial Balance:
It is to be noted that income in the Trial Balance format is to be placed on one side only. Hence, it is the assets side, where it is placed.
Links of Previous Main Topic:-
- Adjustments additional information in preparation of final accounts
- Depreciation in the value of assets
- Appreciation in the value of assets
- Outstanding expenses
- Prepaid expenses
Links of Next Accounting Topics:-
- Unearned income
- Interest on capital
- Interest on drawings
- Interest and dividend on investment
- Interest on loan
- Bad debts not in adjustment
- Provision for bad and doubtful debt adjustment
- Further bad debts adjustment
- Provision for bad and doubtful debts given in the trial balance
- Provision for discount on debtors
- Closing stock
- Summarized presentation of adjustments
- Theoretical questions final account