Incomes due, incomes in advance, depreciation

Incomes are adjusted the same way as expenses, in mirror image.

Accrued income (earned, not yet received). A tenant pays rent of ₹1,000 a month, but only ₹11,000 has come in; you still earned ₹12,000. Entry: Accrued Income A/c Dr, To Income A/c. Add it to that income in the profit and loss account, and show it as a current asset (money to be received). Accrued interest on investments works the same way. In the book, Ankit's commission of ₹1,500 earned but not received raises his profit to ₹25,500.

Income received in advance (received now, for work or use not yet given). If the tenant paid ₹13,000 and only ₹12,000 belongs to this year, ₹1,000 is not yet yours: you owe the tenant that much use of the shop. Entry: Income A/c Dr, To Income Received in Advance A/c. Deduct it from the income, and show it as a current liability. Ankit received ₹3,000 of rent for April to June of next year: it is a liability of ₹3,000, not this year's income.

Depreciation. Entry: Depreciation A/c Dr, To Asset A/c. Charge it to the profit and loss account, and deduct it from the asset in the balance sheet. Ankit's furniture is depreciated at 10%, a charge of ₹1,500.

So an adjustment that adds to an income or reduces an expense raises profit; one that adds to an expense or reduces an income lowers it. After all of Ankit's adjustments, his balance sheet totals ₹59,500 on each side.