An illustration will show the differences between the two methods.
Illustration of Different Methods of Recording Accrued Items
Problem. The royalties income accrued December 31, 1916, amounted to $5,000. During 1917 payments were received on account of royalties to the amount of $35,000. On December 31, 1917, accrued royalties were $5,250.
Solution—Method 1
| Accrued Royalties Receivable | |||
| 1916 | |||
| Dec. 31 | $5,000.00 | ||
| 1917 | |||
| Dec. 31(A) | 250.00 | ||
| Royalties Income | |||
| 1917 | |||
| $35,000.00 | |||
| Dec. 31(A) | 250.00 | ||
Method 2
| Accrued Royalties Receivable | |||
| 1916 | 1917 | ||
| Dec. 31 | $5,000.00 | Jan. 1(A) | $5,000.00 |
| 1917 | |||
| Dec. 31(B) | $5,250.00 | ||
| Royalties Income | |||
| 1917 | 1917 | ||
| Jan. 1(A) | $5,000.00 | $35,000.00 | |
| Dec. 31(B) | 5,250.00 | ||
Of the two methods, the second is somewhat fuller and probably presents the facts more consistently, although involving a little more book work. From a practical standpoint where regard is had to the amount of book work required, the method used in Volume I, pages 116 to 119, sometimes known as the inventory method, serves all the purposes of either of the above methods and requires much less work. By it the above problem would appear as follows: