Income received in advance will be deducted from _______.

Debit side of profit & loss account

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Credit side of profit & loss account

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Debit side of trading account

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Credit side of trading account

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Solution

The correct option is B Credit side of profit & loss account
Sometimes, a certain income is received but the whole amount of it does not belong to the current period. The portion of income which belongs to the next accounting period is termed as income received in advance or an Unearned Income. Income received in advance is adjusted by recording the following entry:
Concerned Income A/c Dr.
To Income Received in Advance A/c
The effect of this entry will be that the balance in the income account will be equal to the amount of income earned for the current accounting period, and the new account of income received in advance will be shown as a liability in the balance sheet. The amount of income received in advance will be deducted from the credit side of profit and loss account.

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