Question

Amount earned during the current accounting year but have not been actually received by the end of the same year is known as ___________.

• A. Prepaid expense
• B. Prepaid income
• C. Outstanding expense
• D. Outstanding Income

Answer 1

Answer: (D)

Outstanding Income

It may happen that certain items of income such as interest on loan, commission, rent, etc. are earned during the current accounting year but have not been actually received by the end of the same year. Such incomes are known as accrued income, outstanding income or incomes earned but not yet received. Common examples of such incomes are commission receivable, income on investments due but not yet received etc. The adjusting entry for accrued income is:

Accrued Income A/c Dr.

To Concerned Income A/c

The amount of accrued income will be added to the related income in the profit and loss account and the new account of accrued income will appear on the asset side of the balance sheet.