Accrued revenue
What is accrued revenue?
Accrued revenue is income that a business has earned for goods supplied or services carried out, but for which it hasn’t yet received payment. It arises from accrual accounting and the revenue recognition principle, which require revenue to be recorded in the same accounting period it’s earned, rather than when the cash is actually paid.
Certain types of businesses are more likely to record accrued revenue, especially those working on longer-term projects and only invoicing clients when the work is finished. For instance, utility companies supply electricity or gas to customers during one month but often don’t receive payment until the next. Similarly, many SaaS (Software as a Service) companies record accrued revenue when users access services before being invoiced.
Accrued revenue, unearned revenue, and accrued expenses
Unlike accrued revenue, realised revenue and recognised revenue refer to revenue that has already been paid. Unearned revenue (also known as deferred revenue) is money received in advance for goods or services that the business hasn’t yet provided. An accrued expense is the opposite of accrued revenue: it’s a cost that a business has incurred or recognised but hasn’t yet paid.
