C6 - Adjustments for Income

What rule is Income?

• -/+

• +/-

What rule is income receivables?

• +/-

• -/+

What rule is income received in advance?

• +/-

• -/+

Where is income receivables classified under?

• Non-current assets

• Current assets

• Non-current liabilities

• Current liabilities

• Income

Where is income received in advance classified under?

• Non-current assets

• Current assets

• Non-current liabilities

• Current liabilities

• Income

$15,000 of rental income had yet to be received at year end.

Identify the correct set of journal entry.

• Dr Rental income

  Cr Income summary

• Dr Rental income receivables

  Cr Rental income

• Dr Rental income

  Cr Rental income received in advance

• Dr Rental income

  Cr Rental income receivables

• Dr Rental income received in advance

  Cr Rental income

Annual rental income is $10,000.

Identify the correct set of journal entry.

• Dr Rental income

  Cr Income summary

• Dr Rental income receivables

  Cr Rental income

• Dr Rental income

  Cr Rental income received in advance

• Dr Rental income

  Cr Rental income receivables

• Dr Rental income received in advance

  Cr Rental income

The landlord received cheque $14,000 for rental income.

Identify the correct set of journal entry.

• Dr Rental income

  Cr Income summary

• Dr Rental income receivables

  Cr Rental income

• Dr Rental income

  Cr Rental income received in advance

• Dr Cash at bank

  Cr Rental income

• Dr Rental income received in advance

  Cr Rental income

At the end of year, the business received $280,000 as commission income of which $80,000 was meant for the next financial year.

Identify the correct set of journal entry for the $80,000

• Dr Commission income

  Cr Income summary

• Dr Commission income receivables

  Cr Commission income

• Dr Commission income

  Cr Commission income received in advance

• Dr Cash at bank

  Cr Commission income

• Dr Commission income received in advance

  Cr Commission income

At the end of year, the business received $10,000 as repair income of which $2,000 was received in advance for next year.

The journal entry is:

Dr Cash at bank

Cr Repair income

What should be the value entered?

(a)  

Answer explanation

At the end of year, the business received $10,000 as repair income of which $2,000 was received in advance for next year.

Therefore, even if out of the $10,000 received in this year $2,000 is for work to be done in next year, there is no need to $10,000 - $2,000. As it is still the case that you have actually received the $10,000 cash this year!

So it is still

Dr Cash at bank $10,000

Cr Income $10,000

If you still don't get it, just imagine your weekly pocket money is $25. And at the start of the week, your parents gave you $50 aka they give 1 week worth in advance. Your wallet will be fatter by $50 (coz u received $50) even if the extra $25 is for next week.