Accrued Income
(Part 2)

Previous lesson: Accrued Income (Part 1)
Next lesson: Expenses Example

g) The Smiths pay the full amount owed to George’s Catering on the 30th of April. What do we do?

Well, the easiest part of this transaction is that we receive cash of $5,000. So bank goes up. And so we debit the business bank account.

But what happens with our debtor? Our debtor is an asset. It exists currently in our records at $5,000. If the Smiths are now paying us, it means that they owe us less. Debtors are decreasing (from $5,000 to $0).

Debtors Decreasing, Bank Increasing

And the accounting entry is thus:

The debtor now amounts to zero dollars – in other words, we are showing that the debt towards George’s Catering no longer exists.

Remember, we defined income as: The event that results in money flowing into the business.

Well, the income did (eventually) result in more cash for the business – as it should.

We also said that income is different to cash received. That should be quite apparent in this example.

Return to Double Entry Accounting

Return to the Home Page

Previous lesson: Accrued Income (Part 1)
Next lesson: Expenses Example

Enjoying this Website?
Help Support it with a Donation



Have your say about what you just read! Leave me a comment in the box below.

Advertise on

Related pages

accrued expense examplewhat is markup percentageowners equity definition in accountingmeaning of cash discountbooks on basic accountinginventory sale journal entryaccounting prime costhow do you calculate retained earningswage expense journal entryaccounting journal and ledgerreverse calculation of vatdefine deptorperiodic inventory control systemaccounting equation worksheet templateformula for cogshow to calculate manufacturing overhead applied to work in processcalculate mark up percentagefifo method calculatorcalculate vat from totalthe balance sheet equationadvantages and disadvantages of fifohow to construct a balance sheetwhat is bills payable and receivableexample of adjusting entrywhat is trade payableaccounting equation exampleprice sales ratio calculatordebiting and creditingprinciples of accounting questions and answers pdfdefine gross pricebalance sheet debtorswhat is fifo and lifo methods of inventoryequity for dummiespldt billing inquiryjournalizing entriesaccounting for owners equitydirect material in cost accountingspecimen of profit and loss accountaccounts receivable and accounts payable are examples of controlling accountscash flow statement direct method formatcommon size income statement and balance sheetwhat is contra entry give an exampleelements of the accounting equationbank reconciliation formulaaccounting multi step income statementnet sales minus cost of goods soldlifo vs fifo accountingmanufacturing overhead calculationsales diary templatejournal entry of bills receivabledebtors agingaccounts receivable ledger examplebasic accounting debits and creditsjournal entry for accrued interestdebtors defexamples of owner's equitywhy are inventories included in the computation of net incomesales ledger debit or creditcontra accounts examplesin accounting what does debit and credit meancalculate factory overheadbooks on basic accountingledger balance definitionwhat does the abbreviation cf stand formarkup calculator percentagefactory overhead formulasolved problems on balance sheetaccrued income journal entryreserve accounting entriespro forma income statement sampleproduction overhead formulasimple trial balance examplecash flow statements template