Chapter 10
KAPLAN PUBLISHING
183
6 Prepaid
income
Prepaid income arises where income has been received
in the accounting
period but which relates to the next accounting period.
In this case, it is necessary to remove the income not relating to the year from
the statement of profit or loss and create a corresponding liability in the
statement of financial position (called prepaid income):
Dr Income (P/L)
$X
Cr Prepaid Income (SFP)
$X
Illustration 4 – Prepaid income
A business rents out a property at an income of $4,000 per month.
$64,000 has been received in the year ended 31 December 20X5.
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