Financial Statements - II

However, this income does not pertain to current year and hence will not be credited to profit and loss account. It is income received in advance and will be recognised as a liability amounting to Rs. , . Ankit needs to record an adjustment entry to give effect to income received in advance by way of following This will lead a new account of rent received in advance of Rs. , which will appear as follows : Balance Sheet of Ankit as at March , Liabilities Assets Owners Funds Non Current Assets Add Net profit , , Current Assets Non Current Liabilities , Long-term loan Prepaid salary Current Liabilities Accrued commission Bank Outstanding wages Cash Rent received in advance , , Recall from chapter (Part-I), that depreciation is the decline in the value of assets on account of wear and tear and passage of time. It is treated as a business expense and is debited to profit and loss account. This, in effect, amounts to writing-off a portion of the cost of an asset which has been used in the business for the purpose of earning profits. The entry for providing depreciation is : In the balance sheet, the asset will be shown at cost minus the amount of