taken from the
It may occur that you receive income or a portion of an income
in advance. In the financial statements all income must be shown for a period of
one year or 12 consecutive months or accounting periods or reporting dates. The
income account must be adjusted to reflect the correct income amounts at the end
of the financial year. The amount of the income will decrease in the books of
the business and a liability is created - Income received in advance. It is
regarded as a liability to the business at the end of the financial year as the
income is only receivable in the next financial year.
To Identify, Enter the Transaction and to Post the Transaction to the Ledger:
Identify the account and calculate the income received in
advance. For example, after analysing the pre-adjustment trial
balance, it is discovered that the rent income is reflected as R(£)13 000. Rent
income amounts to R(£)1 000 per month. The payment received for rent was in
respect for March. Rent has been received for 13 months.
Rent of R(£) 13 000 was already received for 13 months. The income account reflects rent in the current financial year for 13 months. Only 12 months is applicable to the current financial year. The payments for one month, which is the income for March is a current liability for the business as at the closing date of the financial year since the benefit for the income is already received for the next financial year. To have the correct income reflected in the financial statements, the rent received for the future period must be taken out of the income account and transferred to the rent received in advance account.
Enter the transaction in the General Journal. Press the
key on your keyboard or click on the 
speed button or icon. The Batch Type
selection screen will be displayed.
Select the General journal Batch Type and click on the 
button. The General journal Batch Entry screen will be displayed. If the correct
contra account for the batch was not displayed on the Batch Type selection
screen, press the 
key on your keyboard or click on the 
speed button or icon to set the options
for this batch. Note that it is recommended that the Amount Entry field be set
to allow both (debit and credit).
Enter the transaction in the batch. After entering the
transactions in the general journal, the transactions is as follows:
Click on the 
speed button or icon or press the
key on your keyboard. Select the change the alias option.
Click on the 
speed button or icon or press the
key on your keyboard to post the transactions to the ledger. After
posting the transactions to the ledger, the entries should reflect as follows in
the ledger.
The credit balance of R(£) 13 000 (payments for the year to date is adjusted reduced by the R(£) 1 000 of the transaction. This result that the net profit be decreased by the amount of R(£) 1 000, which is already received as at the end of the financial year (28/29 February).
It has also increased the current liabilities, as it is an income, which was already received for the new financial year. Therefore, an income of R(£) 12 000 will be recognised as an income and not R(£) 13 000.
To Identify, Enter the Transaction and to Post the Transaction to the Ledger:
Identify the account and calculate the income received in
advance. For example, after analysing the pre-adjustment trial
balance, it is discovered that the rent income is reflected as R(£)13 000. Rent
income amounts to R(£)1 000 per month. The payment received for rent was in
respect for March. Rent has been received for 13 months. Rent of R(£) 13 000 was already received for 13 months. The income account reflects rent in the current financial year for 13 months. Only 12 months is applicable to the current financial year. The payments for one month, which is the income for March is a current liability for the business as at the closing date of the financial year since the benefit for the income is already received for the next financial year. To have the correct income reflected in the financial statements, the rent received for the future period must be taken out of the income account and transferred to the rent received in advance account.
Enter the transaction in the General Journal. Press the
key on your keyboard or click on the speed button or icon. The Batch Type
selection screen will be displayed. Select the General journal Batch Type and click on the button. The General journal Batch Entry screen will be displayed. If the correct
contra account for the batch was not displayed on the Batch Type selection
screen, press the key on your keyboard or click on the speed button or icon to set the options
for this batch. Note that it is recommended that the Amount Entry field be set
to allow both (debit and credit).Enter the transaction in the batch. After entering the
transactions in the general journal, the transactions is as follows:
Click on the speed button or icon or press the
key on your keyboard. Select the change the alias option.Click on the speed button or icon or press the
key on your keyboard to post the transactions to the ledger. After
posting the transactions to the ledger, the entries should reflect as follows in
the ledger.The credit balance of R(£) 13 000 (payments for the year to date is adjusted reduced by the R(£) 1 000 of the transaction. This result that the net profit be decreased by the amount of R(£) 1 000, which is already received as at the end of the financial year (28/29 February).
It has also increased the current liabilities, as it is an income, which was already received for the new financial year. Therefore, an income of R(£) 12 000 will be recognised as an income and not R(£) 13 000.
