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ACCA Applied Knowledge · Financial Accounting · Accrued expenses (accruals), prepaid expenses (prepayments), accrued income and deferred income

Delta Co earns commission income. At 1 January the statement of financial position showed accrued income of $1,800. During the year cash received from commission was $26,400. At 31 December commission earned but not yet received was $2,500. What is the commission income in profit or loss for the year?

Commission income is $27,100. Cash received of $26,400 includes $1,800 earned last year, which is deducted, and excludes $2,500 earned but uncollected this year, which is added. So 26,400 minus 1,800 plus 2,500 gives $27,100.

  1. A$25,700
  2. B$27,100Correct
  3. C$26,400
  4. D$30,700

Explanation

Income = cash received - opening accrued income + closing accrued income = 26,400 - 1,800 + 2,500 = $27,100. The opening accrual relates to last year's income and was collected this year, so it is removed. $25,700 wrongly reverses both adjustments.

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