ACCRUED REVENUE: Recognition, Adjusting Entries, Financial Statement Impact
- Graziano Stefanelli
- 2 days ago
- 2 min read

Accrued revenue refers to income earned but not yet billed or received by the end of a reporting period. It ensures that revenue is recognized in the correct accounting period, even when the cash or invoice timing is delayed.
1. What Is Accrued Revenue?
Accrued revenue is earned income from goods delivered or services performed that have not yet been invoiced or collected.
This concept is central to accrual accounting, which requires revenue to be recorded when earned, not when cash is received.
Common examples include:
Consulting services rendered but not yet billed
Interest earned on investments but not yet received
Long-term contracts with unbilled milestones
Subscription services partially completed
2. Initial Recognition and Adjusting Entry
When revenue is earned but not yet invoiced or paid, a receivable must be recorded.
General adjusting entry at period-end:
debit Accrued Revenue (Asset or Accounts Receivable)
credit Revenue (Income)
Example
On December 31, a consultant completes $6,000 of work for a client, invoice to be sent in January:
debit Accrued Revenue .................................. 6,000
credit Consulting Revenue .............................. 6,000
This aligns the earned revenue with the correct reporting period.
3. Reversal or Invoicing in the Next Period
When the invoice is eventually sent or cash is received:
If using accrued revenue (as an asset):
debit Accounts Receivable
credit Accrued Revenue
Then, when cash is collected:
debit Cash
credit Accounts Receivable
This ensures that no double revenue is recognized.
4. Matching Principle and Revenue Recognition
Accrued revenue ensures compliance with the revenue recognition principle, which states:
Revenue is recorded when performance obligations are satisfied, not when cash is received.
This approach improves the accuracy of net income and financial position at period-end.
5. Financial Statement Impact
Balance Sheet: Accrued revenue appears under current assets (sometimes labeled “Unbilled Revenue” or “Contract Assets”).
Income Statement: Recognized as earned revenue in the period the service or delivery occurred.
Cash Flow Statement: Impacts operating activities only when cash is collected—not when the revenue is accrued.
6. Accrued Revenue vs Deferred Revenue
Aspect | Accrued Revenue | Deferred (Unearned) Revenue |
Timing | Earned, not yet billed or received | Received, but not yet earned |
Balance Sheet | Current asset | Current liability |
Recognition | Revenue increases | Revenue deferred |
7. Examples by Industry
Industry | Accrued Revenue Example |
Consulting | Hours worked in December, billed in January |
Finance | Interest earned on a bond, payable next quarter |
Construction | Milestone completed in year-end, invoiced after audit approval |
SaaS / Subscriptions | Service delivered but not yet billed under monthly billing cycle |
8. Risks and Considerations
Accrued revenue requires judgment and accurate tracking to avoid:
Overstating revenue or receivables
Recording unearned income
Audit reclassifications or reversals
Companies must assess:
Evidence of performance
Collectibility likelihood
Consistent application of revenue policies (ASC 606 / IFRS 15)
Key take-aways
Accrued revenue ensures income is recognized when earned, not when billed.
It appears as an asset and supports proper matching of revenue and expenses.
Judicious recognition is critical to avoid overstating earnings.
Accurate accruals reflect financial performance even when billing or cash is delayed.
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