Learn how to record accrued income and income received in advance in TallyPrime. Understand their meaning, accounting treatment, ledger creation, journal entries, and practical examples to maintain accurate business accounts.
How to Record Accrued Income and Income Received in Advance in TallyPrime
When managing business accounts, it is important to record income in the correct accounting period. However, there are situations where income is earned but not yet received, or money is received before the business actually provides a service.
These situations are known as Accrued Income and Income Received in Advance.
Both transactions are important for maintaining accurate financial statements, calculating the correct profit, and following the accrual basis of accounting.
In this guide, you will learn what accrued income and income received in advance mean, how they differ, and how to record both entries in TallyPrime with practical examples and step-by-step instructions.
What Is Accrued Income in Accounting?
Accrued income refers to money that a business has already earned but has not yet received.
In simple words, the service has been provided or the income has been earned, but the payment is still pending.
Under the accrual accounting method, income is recorded when it is earned, not necessarily when the money is received.
Example of Accrued Income
Suppose your business provides consulting services worth ₹20,000 in March 2026. However, the customer will make the payment in April 2026.
Although the money has not arrived in your bank account, the income belongs to March because the service was completed during that month.
Therefore, you should record the income in March itself.
Journal Entry for Accrued Income
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Accrued Income A/c Dr. | 20,000 | — |
| To Service Income A/c | — | 20,000 |
| Total | 20,000 | 20,000 |
This entry recognises the income earned and the amount receivable from the customer.
What Is Income Received in Advance?
Income received in advance refers to money received before a business has actually earned that income.
In other words, the customer has already paid, but the business still needs to provide the agreed goods or services.
Since the income has not yet been earned, it should not immediately be treated as revenue. Instead, it is recorded as a liability.
Example of Income Received in Advance
Suppose a company receives ₹36,000 from a customer in March 2026 for an annual maintenance service covering April 2026 to March 2027.
The company has received the money, but the service period has not started.
Therefore, the entire amount should initially be recorded as income received in advance.
Journal Entry for Income Received in Advance
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank A/c Dr. | 36,000 | — |
| To Income Received in Advance A/c | — | 36,000 |
| Total | 36,000 | 36,000 |
As the service is provided, the relevant portion of the advance is transferred to income.
For example, if ₹36,000 relates to 12 months, ₹3,000 will be recognised as income each month.
Difference Between Accrued Income and Income Received in Advance
Both adjustments are necessary for accurate financial reporting, but they represent different situations.
| Basis | Accrued Income | Income Received in Advance |
|---|---|---|
| Meaning | Income earned but not received | Money received but not yet earned |
| Payment | Not received | Already received |
| Accounting nature | Asset | Liability |
| Income recognition | Recorded when earned | Recorded when earned, not when received |
| Example | Outstanding interest | Advance rent |
| Balance Sheet | Current Asset (normally) | Current Liability (normally) |
| Journal Entry | Accrued Income Dr. | Bank/Cash Dr. |
How to Create Accrued Income Ledger in TallyPrime
Before recording accrued income, you need to create a separate ledger in TallyPrime.
Follow these steps:
Step 1: Open TallyPrime
Open your company in TallyPrime.
Go to Gateway of Tally.
Select Create under Masters.
Step 2: Create an Accrued Income Ledger
Enter the following details:
| Field | Details |
|---|---|
| Name | Accrued Income |
| Under | Current Assets |
| Inventory Values Are Affected | No |
Save the ledger by pressing Ctrl + A.
Step 3: Check the Ledger Group
Make sure the Accrued Income ledger is placed under Current Assets.
This is because the amount represents income earned by the business that is still receivable.
How to Record Accrued Income Entry in TallyPrime
Let's understand the complete process using a practical example.
Suppose your company earned ₹20,000 as service income in March 2026, but the customer will pay in April 2026.
You need to record this income in March.
Step 1: Open Journal Voucher
Go to Gateway of Tally.
Select Vouchers.
Choose Journal Voucher.
Alternatively, press F7 (Journal).
Step 2: Enter the Journal Entry
Enter the following details:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Accrued Income | 20,000 | — |
| Service Income | — | 20,000 |
Step 3: Add Narration
Enter a suitable narration:
"Being service income accrued for March 2026 but not yet received."
Step 4: Save the Voucher
Press Ctrl + A to save the journal voucher.
Your accrued income entry is now recorded successfully.
Important: When the customer pays ₹20,000 in April, record the receipt separately:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank A/c | 20,000 | — |
| Accrued Income A/c | — | 20,000 |
This clears the accrued income balance without recording the same income twice.
How to Create Income Received in Advance Ledger in TallyPrime
Before recording an advance payment, create a separate ledger for income received in advance.
Follow these steps:
Step 1: Open Ledger Creation
Open Gateway of Tally.
Select Create under Masters.
Choose Ledger.
Step 2: Enter Ledger Details
Fill in the following information:
| Field | Details |
|---|---|
| Name | Income Received in Advance |
| Under | Current Liabilities |
| Inventory Values Are Affected | No |
Save the ledger using Ctrl + A.
Step 3: Verify the Ledger Group
Ensure that the ledger is created under Current Liabilities because the business still has an obligation to provide goods or services.
How to Record Income Received in Advance in TallyPrime
Let's take a practical example.
Suppose your business receives ₹36,000 in March 2026 for an annual service contract starting in April 2026.
Since the service has not yet been provided, the amount must be recorded as an advance liability.
Step 1: Open Receipt Voucher
Go to Gateway of Tally.
Select Vouchers.
Choose Receipt Voucher.
Alternatively, press F6 (Receipt).
Step 2: Enter the Receipt Details
Record the following transaction:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank A/c | 36,000 | — |
| Income Received in Advance | — | 36,000 |
Step 3: Enter Narration
You can use this narration:
"Being advance payment received for annual maintenance services for April 2026 to March 2027."
Step 4: Save the Voucher
Press Ctrl + A to save the receipt voucher.
The amount will now appear as a liability until the business earns the income.
How to Transfer Advance Income to Actual Income in TallyPrime
Receiving an advance is only the first step. You must gradually recognise the income as the service is provided.
Continuing with our example, the company received ₹36,000 for a 12-month service contract.
Monthly income calculation:
₹36,000 ÷ 12 = ₹3,000 per month.
At the end of April 2026, the company has earned ₹3,000.
Journal Entry for April 2026
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Income Received in Advance | 3,000 | — |
| To Service Income | — | 3,000 |
| Total | 3,000 | 3,000 |
How to Enter This in TallyPrime
Open Gateway of Tally.
Go to Vouchers.
Select Journal Voucher (F7).
Debit Income Received in Advance.
Credit Service Income.
Enter the amount as ₹3,000.
Add narration explaining the monthly income recognition.
Press Ctrl + A to save.
Repeat this process every month as the service is delivered.
How to Check Accrued Income and Advance Income in TallyPrime
After recording both transactions, it is important to verify that the balances are reflected correctly.
To Check Accrued Income:
Open Gateway of Tally.
Go to Balance Sheet.
Expand Current Assets.
Locate the Accrued Income ledger.
To Check Income Received in Advance:
Open Gateway of Tally.
Go to Balance Sheet.
Expand Current Liabilities.
Locate the Income Received in Advance ledger.
You can also open the respective ledger reports to check individual voucher entries and outstanding balances.
Common Mistakes to Avoid While Recording These Entries
Even a small accounting mistake can affect your profit and financial statements. Keep these points in mind:
Recording accrued income only when payment arrives: This can result in income being shown in the wrong accounting period.
Treating advance income as earned revenue: Money received in advance should remain a liability until the business fulfils its obligation.
Using the wrong ledger group: Accrued income generally belongs under Current Assets, while unearned income generally belongs under Current Liabilities.
Recording income twice: When accrued income is later received, adjust the accrued income ledger instead of crediting the income ledger again.
Ignoring monthly adjustments: For long-term service contracts or advance rent, recognise the appropriate income regularly.
Ignoring GST implications: The GST time of supply and tax liability may arise separately from the accounting recognition of income. Follow applicable GST rules rather than assuming the accounting entry determines the tax date.
Conclusion
Accrued income and income received in advance are two important accounting adjustments in TallyPrime.
Accrued income represents money earned but not yet received, whereas income received in advance represents money received before it is earned.
By creating the correct ledgers and recording the appropriate journal and receipt vouchers, you can maintain accurate accounts and prepare reliable financial statements.
Always remember that income should be recognised in the period in which it is actually earned, regardless of when the payment is received.
Frequently Asked Questions (FAQs)
Q1. What is accrued income in TallyPrime?
Accrued income is income earned by a business but not yet received. It is generally recorded under Current Assets.
Q2. Which ledger group is used for accrued income?
Create the Accrued Income ledger under Current Assets.
Q3. Under which group should income received in advance be created?
Create the Income Received in Advance ledger under Current Liabilities.
Q4. Which voucher is used to record accrued income in TallyPrime?
Use Journal Voucher (F7) to record accrued income.
Q5. Which voucher is used to record income received in advance?
Use Receipt Voucher (F6) to record the money received in advance. Use a Journal Voucher later to recognise the income as it is earned.
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