FRF7
Syllabus B. ACCOUNTING FOR TRANSACTIONS IN FINANCIAL STATEMENTS B10. Revenue

B10b. Accrued and deferred Income. 5 / 5

Syllabus B10b)

Explain and apply the criteria for recognising revenue generated from contracts where performance obligations are satisfied over time or at a point in time.

An entity will accrue income when it has earned the income during the period but it has not yet been invoiced or received. This will increase income in the statement of profit or loss and be shown as a receivable in the statement of financial position at year end.

Accounting Treatment: Accrued Income

Dr Accrued income (SOFP)
Cr Income Account (I/S)

When an entity has received income in advance of it being earned, it should be deferred to the following period. This will reduce income in the statement of profit or loss and be shown as a payable in the statement of financial position at the year end.

Accounting Treatment: Deferred Income

Dr Income Account (I/S)
Cr Deferred Income (SOFP)