Question

What are the other names for income received in advance?

• A. Unearned Income
• B. Accrued Income
• C. Pre-received income
• D. Both A & C

Answer 1

The correct option is D Both A & C

Sometimes a certain income is received but the whole amount of it does not belong to the current period. The portion of the income which belongs to the next accounting period is termed as income received in advance. The other names for income received in advance is known as an Unearned Income or Pre-received 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 on the liability side of the balance sheet.