11 August 2016
1) Accrued Income-Accrued income is income which has been earned but not yet received. Income must be recorded in the accounting period in which it is earned. Therefore, accrued income must be recognized in the accounting period in which it arises rather than in the subsequent period in which it will be received. Best Example- FD Interest even though maturity date is different we have to do provision for the year end and recognise Income. same way in case of rent receivable received on subsequent of end of the year.
Accrued Expenses-An accrued expense is an accounting expense recognized in the books before it is paid for. It is a liability, and is usually current. Rent, Electricity , salary provisions made on month end actually paid subsequent to that month.
Deferred Expenses-A deferred expense is an asset that represents a prepayment of future expenses that have not yet been incurred.it is prepaid expenses . Eg- Insurance policy pertains to 2 financial year.Premium paid to the extent of next financial year is treated as deferred expenses and treated as asset.
Prepaid Income-It is an amount that was received by a company in advance of earning it. The amount unearned (and therefore deferred) as of the date of the financial statements should be reported as a liability. Rent received in advance pertains to subsequent financial year.can be treated as Prepaid Income
13 August 2016
already Mentioned in Reply 1) FD interest accrued but not actually credited we have to consider as Accrued Income , Rental Income to be booked on accrued basis i.e March month Rent received in April , but entry to be booked in March as rent receivable.
Accrued Expenses- Salary ,Rent ,Electricity exps of March actually Paid in the Month of Subsequent Year for Booking we have to do Provision for the year in Which actually incurred i.e.March Month
Deferred or Prepaid Expanses best example Insurance renewed in Middle of the year Few month pertains to this year and few month pertains to next financial year, We have to account expenses to the extent of Financial year balance to be considered Prepaid Expenses same to be considered as Current Asset , in the bigning of financial year you have to reverse the entry same will be expenses for that financial year.
Prepaid income -Rent of Next year Received in Advance Pertains to Future Month . Same to be treated as Rent Advance which is Grouped under Current Liability , Same can be adjusted in the bigining of the year or month relate to which rent received in advance .
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