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Accounting for accruals and prepayments

Accrued and prepaid income

2.1 Accrued income

Accrued income arises when the income has been earned in the accounting period,
but cash not yet received.

In this case, it is necessary to record this income in the statement of profit or loss and
crease a corresponding asset (accrued income) in the statement of financial position,
as follows:

Debit Accrued income account (SOFP)

Credit Income account (SOPL)

Accrued income therefore increases profit.

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