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

Kestrel Co receives commission income. At 1 April 20X5 commission receivable (accrued income) was $900 and at 31 March 20X6 commission received in advance (deferred income) was $600. Cash received during the year was $14,500. What is the commission income in profit or loss for the year ended 31 March 20X6?

Commission income is $13,000: cash received of $14,500 less the $900 opening accrued income, which belongs to the previous year, and less the $600 deferred income, which belongs to next year.

  1. A$12,100Correct
  2. B$13,000
  3. C$14,200
  4. D$15,100

Explanation

Income = cash received - opening accrued income + closing deferred income... Opening accrued income of $900 relates to last year's income, so deduct it: 14,500 - 900 = 13,600. Closing deferred income relates to next year, so deduct it: 13,600 - 600 = $13,000.

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