Definition
Accrued revenue is income that has been earned but not yet received. It is an accounting concept that is used to recognize revenue that has been earned but not yet received in cash. Accrued revenue is recorded in the accounting period in which it is earned, regardless of when the cash is received.
Importance
Accrued revenue is important because it allows businesses to recognize revenue that has been earned but not yet received. This helps businesses to accurately report their financial performance and to make informed decisions about their operations. Accrued revenue also helps businesses to better manage their cash flow, as they can plan for future cash inflows based on the revenue that has been earned but not yet received.
Example
For example, a company may provide services to a customer in December but not receive payment until January. In this case, the company would record the revenue as accrued revenue in December, even though the cash was not received until January.
Table
Accrued Revenue
Definition Income that has been earned but not yet received.
Importance Allows businesses to recognize revenue that has been earned but not yet received.
Example A company provides services to a customer in December but not receive payment until January.
Key Takeaways
- Accrued revenue is income that has been earned but not yet received.
- Accrued revenue is important because it allows businesses to recognize revenue that has been earned but not yet received.
- Accrued revenue is recorded in the accounting period in which it is earned, regardless of when the cash is received.
- Accrued revenue helps businesses to better manage their cash flow.
Conclusion
Accrued revenue is an important accounting concept that allows businesses to recognize revenue that has been earned but not yet received. Accrued revenue is recorded in the accounting period in which it is earned, regardless of when the cash is received. Accrued revenue helps businesses to better manage their cash flow and to make informed decisions about their operations.
