Simple Entries for Anticipated Income
The most common types of anticipated income such as accounts receivables, pre-paid expenses, and--if a franchise--franchisor incentives are simpler to make than predicted income that may or may not occur.
In the screenshot to the right, first is an accounts receivable (A/R) journal entry for anticipated income. Here, if your business sells to a credit customer, that income is anticipated—usually receivables are expected in net 10 or net 30 days. Once you sell to the customer, you credit your sales account and debit the A/R account. When the customer pays, a simple debit to cash and a credit to your A/R account wipes out the A/R; however, the sales credit remains on the income statement.
In the screenshot to the left, we see an example of a journal entry for anticipated income for pre-paid expenses. On a balance sheet, most pre-paid expenses such as utilities are shown as an asset as they are expected to be regained.
Here, the journal entry is a debit to the pre-paid expense and a credit to cash in bank. Once the pre-paid expense is regained, a debit to cash in bank and a credit to your pre-paid expense account clears the transaction for a clean balance sheet.
Finally, most franchise businesses expect incentives from the franchisor based on sales efforts or quotas. Here in our screenshot to the right, the franchisor incentives expected are posted in an income statement account as a credit, and a debit goes to the franchisor receivable account. Once the money from the franchisor is received, a credit to the franchisor receivable account and a debit to cash in bank clears out the receivables due; however, the incentives earned remain on the income statement.
Screenshots created by and courtesy of author.