Authorship
added to expenses. Similarly, any money owed to the business must be added to revenue.
Consider the example of Ben McDonald who runs a restaurant called Café Noir in Nottingham. Above the restaurant is a flat which is rented out for £1000 per quarter. The rent is classed as part of the business’s income. At the end of the financial year, 30 December 2000, the trial balance indicated that:
· The amount paid for gas was £980. This did not include the bill for the last quarter’s gas usage which had not yet been paid. The bill was £330, all of which related to the trading period ended on 31 December 2000.
· The amount of rent received for the year was £3,000. Ben’s tenant still owed £1,000 for the period up to 31 December 2000.
Café Noir
Trial Balance extract as at 31.12.00
Dr Cr
£ £
Gas 980
Rent receivable 3,000
Accounting for the accrued expense: The accrued expense is the unpaid gas bill of £330 for the current year’s consumption of gas. Copy the example from the board of dealing with the accrued expense:
Accounting for accrued revenue: The accrued revenue is for the rent owed of £1,000 but not yet received. Copy the example from the board of dealing with the accrued revenue:
Adjusting the trial balance: The adjustments for accrued income and accrued expenses can be included in an adjusted trial balance.
Café Noir
Trial Balance as at 31.12.00
Dr Cr
£ £
Gas 1,310
Gas accrued 330
Rent receivable 4,000
Rent accrued 1,000
The debit balance on the gas account has increased to £1,310 to show the effect of the accrued expense. A new balance for £330 is listed for gas accrued, showing that Café Noir still owed £330 for gas, it is a current liability. The credit balance on the rent received account has increased to £4000 to show the effect of the [next page]