Q.Commission received during the year includes ₹3,000 relating to services to be rendered next year. The correct treatment of this ₹3,000 is:
(A) Add to Commission Received in P&L, show as a Current Asset
(B) Deduct from Commission Received in P&L, show as a Current Liability
(C) Deduct from Commission Received in P&L, show as a Current Asset
(D) Ignore it, since the cash has already been received

This is income received in advance — the service has not yet been earned — so it is deducted from the income and shown as a liability owed to the payer.

Apply the mirror-image rule: unearned income is deducted and becomes a liability, just as a prepaid expense is deducted and becomes an asset.

Since the ₹3,000 relates to services not yet rendered, it has not truly been EARNED this year, even though the cash was received — the Trial Balance's Commission Received figure OVERSTATES this year's true income. It is deducted from Commission Received in the P&L Account, and because the business still owes the corresponding service (or a refund) to the payer, it is shown as a Current Liability.

Option-by-option analysis:

• (A) Incorrect — this describes Accrued Income, the opposite adjustment.
• (B) Correct — this is exactly the double effect of income received in advance.
• (C) Incorrect — unearned income received is a LIABILITY (an obligation still owed), not an asset.
• (D) Incorrect — cash received does not, by itself, mean income has been earned.