Financial Statements - II

profit by Rs. , making it as Rs. , . Further, it will be shown in the balance sheet of Ankit on the assets side under the head current asset.

Balance Sheet of Ankit as at March , Liabilities Assets Owners Funds Non-Current Assets Add Profit , , Current Assets Non-Current Liabilities , Long-term loan Prepaid salary Current Liabilities Accrued commission Bank Outstanding wages Cash , , 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 or an Unearned Income . Income received in advance is adjusted by recording the following 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. For example , let us assume Ankit has agreed in March , to sublet a part of the building to a fellow shopkeeper @ Rs.

, per month. The person gives him rent in advance for the next three months of April, May and June. The amount received had been credited to the profit and loss account.