Answer / romey singh

THE INTEREST WHICH IS EARNED BUT STILL NOT RECEIVED.FOR
EXAMPLE IF U GET COMMISSION ON SIX MONTHLY BASIS AND IN
BETWEEN THE FINANCIAL CLOSING COMES SAY MARCH 31 AND NEXT
COMMISSION DUE DATE IS JUNE 30 IT MEANS THAT THE FIRST 3
MONTHS COMES UNDER (JAN TO MARCH) CURRENT FINANCIAL
YEAR,THEREFORE IT IS ESSENTIAL TO CHARGE COMMISSION OF THOSE
3 MONTHS IN CURRENT FINANCIAL YEAR(ACCORDING TO RULES OF ACCRUAL ACCOUNTING)SO U WILL CALCULATE THE 3 MONTHS
COMMISSION AND PASS THE FOLLOWING ENTRY.

ACCRUED COMMISSION A/C......DR
TO COMMISSION A/C

YOU WILL SHOW THIS AMOUNT IN ASSETS SIDE OF B/S.

Answer / h.r. sreepada bhagi

Interest payable on borrowed money (Loan) as on a particular
date but is not due is accrued interest.

For example, Interest is payable on quarterly basis on a
loan of Rs.10 Lacs principal as on 30.09.20x0 @15% p.a. Next
due date for interest is, say 31.12.20x0. Interest accrued
on 30.11.x0 will be Rs. 25000/- (i.e. Interest from st
October to 30th November 20x0)

Answer / danny deb

1. A term used to describe an accrual accounting method when
interest that is either payable or receivable has been
recognized, but not yet paid or received. Accrued interest
occurs as a result of the difference in timing of cash flows
and the measurement of these cash flows.

2. The interest that has accumulated on a bond since the
last interest payment up to, but not including, the
settlement date.

1. For example, accrued interest receivable occurs when
interest on an outstanding receivable has been earned by the
company, but has not yet been received. A loan to a customer
for goods sold would result in interest being charged on the
loan. If the loan is extended on October 1 and the lending
company's year ends on December 31, there will be two months
of accrued interest receivable recorded as interest revenue
in the company's financial statements for the year.

2. Accrued interest is added to the contract price of a bond
transaction. Accrued interest is that which has been earned
since the last coupon payment. Because the bond hasn't
expired or the next payment is not yet due, the owner of the
bond hasn't officially received the money. If he or she
sells the bond, accrued interest is added to the sale price.

Answer / chandra

It is an Incurred expenditure but not paid yet, therefore
accrue ( increase ) the expenditure so we are not missing
out on our liability. This way we account all expenditure
that is to be paid , but not paid yet.
In this case, interest is accrued when the interest becomes
due on on debt obligation on a stipulated time but not paid
yet or no actual cash out flow, but we still take into
account the interest expenditure by accounting or accruing it.

In what circumstance month end liability wil increase ?

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