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Explanation:- The transaction will affect both sides as cash has been received so it is

to be added back in cash as well as in Capital.
· Transaction related to Accrued/outstanding Income

Income is to be added back into the capital but as it is not received should be
shown in the Assets Side as accrued Income because it meant to be received in

this financial year.

A. Accrued Interest Rs. 10,000
Effect

Assets = Capital + Liabilities

Cash Goods Accured Capital Creditors

Income

Old Equation 2,88,000 + 20,000 + – = 3,06,000 + 10,000

Transactions + 8,000 + 0 + 10,000 = +10,000 + 0

N.E. 2,96,000 + 20,000 + 10,000 = 3,06,000 + 10,000

Explanation:- The transaction will effect both sides as Accrued Income has been
added back to the capital & as it is not received so it is to be shown in the assets
side as an asset.
· Transaction related to Prepaid or Advance Income

As Income received in advance so it is not belong to current financial year, so it
cannot be added back to the Capital. It as an amount which is received by the
business firm for the future course of activity till the activity not happened it is

the Liability of the business.

Assets = Capital + Liabilities

Cash Goods Accured Capital Creditors Prepaid

Income Rent

Old Equation 2,96,000 + 20,000 + 10,000 = 3,06,000 + 10,000 +

Transactions + 5,000 + 0 + 0 = +10,000 + 0 + 5,000