Close this search box.

Table of Contents

Accrued Revenue


Accrued revenue refers to the earnings generated from goods or services that have been delivered or provided, but for which payment has not yet been received. It is recognized as an asset on a company’s balance sheet because it denotes the existence of a future revenue. Essentially, accrued revenue is money that is owed to a business for the goods or services they have already supplied.


The phonetic pronunciation of the keyword ‘Accrued Revenue’ is: əˈkruːd ˈrɛvəˌn(j)uː

Key Takeaways

  1. Accrued Revenue is an accounting concept that represents revenue earned but not yet received.
  2. It is recorded as an asset on the balance sheet, showing the amount that a company expects to receive in the future.
  3. Accrued Revenue is typically recognized when goods or services are provided before payment and often arises in situations with periodic billing or long-term contracts.


Accrued revenue is an important financial term because it refers to the revenue that has been earned through providing goods or services, but has not yet been received or billed by the business. This concept is crucial for businesses as it contributes to a more accurate representation of their financial health and performance within a specific accounting period. By recognizing accrued revenue, businesses can make informed decisions regarding cash flows, budgeting, and financial reporting. Moreover, it ensures that the company’s financial statements comply with the accrual accounting method, which records financial events when they are incurred rather than when the payment is made, thus promoting transparency and accuracy in financial reporting.


Accrued revenue serves as a key component in financial reporting, as it helps to paint a more accurate picture of a company’s earned but not yet billed revenues during a specific accounting period. Businesses that deal with long-term projects, multiple billing cycles, or orders delivered in installments often utilize this financial concept. Accrued revenue plays a crucial role in allowing companies and their stakeholders to assess their financial health, measure their revenue generation capabilities, and make more informed decisions regarding spending and resource allocation. As an integral part of the accrual accounting method, accrued revenue enables businesses to capture the value of services they’ve provided or goods they’ve delivered before actually receiving payment from customers. This function offers a more consistent and informative depiction of a company’s financial performance, allowing businesses to track revenue growth and ultimately achieve more sustainable cash flows. By accurately estimating and reporting their earned revenues, companies can abide by the matching principle, which dictates that revenues and expenses should be matched and recorded in the same accounting period. Not only does this approach benefit businesses directly, but it also provides investors and regulators with trustworthy data, fostering transparency and confidence in the markets.


Accrued revenue refers to the revenue that has been earned by a company for providing goods or services to its customers, but the payment for these goods or services has not yet been received. In other words, it represents the revenue that a company can claim but has not yet been billed or collected. Here are three real-world examples of accrued revenue: 1. Construction Company: A construction company has signed a two-year contract to build a residential complex for a client. The company has completed 70% of the project by the end of the first year, but full payment will be received only after the project completion. The revenue earned for the 70% of the work completed so far, but not yet billed, is an example of accrued revenue. 2. Consulting Firm: A management consulting firm has been working on a six-month project for a client. The firm has billed the client on a quarterly basis. By the end of the second month, the consulting firm has provided significant deliverables as per the project schedule, but has not yet billed the client for their work. The fee associated with the work completed in the second month, but not yet billed, is an example of accrued revenue. 3. Telecommunications Company: A telecommunications company offers monthly subscription plans to its customers for various communication services. Customers pay for the services at the end of the month. By the middle of the month, the company has provided half of the services to its customers but has not yet received any payments. The revenue from the services provided during those first two weeks, but not yet collected, is an example of accrued revenue.

Frequently Asked Questions(FAQ)

What is accrued revenue?
Accrued revenue is the income that a business has earned through the delivery of goods or services but has not yet been billed or received payment for. It is recorded as an asset on the balance sheet to indicate the amount to be received in the future.
Why is accrued revenue important for businesses?
Accrued revenue helps businesses track their financial performance more accurately. Recording accrued revenue allows them to recognize the income they have earned in a specific period, regardless of whether payment has been received or not. This enables businesses to make better decisions based on their true financial position.
How is accrued revenue recorded in financial statements?
Accrued revenue is recorded as an asset on the balance sheet, typically under the “accounts receivable” section. This shows the amount the company expects to receive in the future for goods or services provided during a specific period.
When should accrued revenue be recognized?
Accrued revenue should be recognized when the goods or services have been provided, and the business has earned the revenue, regardless of whether an invoice has been issued or the payment has been received.
How is accrued revenue different from unearned revenue?
Accrued revenue refers to the income earned by a business for goods or services delivered but not yet billed or received payment for. On the other hand, unearned revenue represents payments received by a business before delivering the goods or services. Unearned revenue is recorded as a liability, while accrued revenue is recorded as an asset.
How does accrued revenue affect the income statement?
Accrued revenue directly impacts the income statement as it’s recognized as revenue in the reporting period during which the goods or services are delivered. This recognition increases the company’s total revenue, resulting in a more accurate representation of the company’s financial performance.
How do businesses convert accrued revenue to actual cash flow?
To convert accrued revenue to actual cash flow, businesses send invoices to their customers and collect the payment for the goods or services provided. Once the payment is received, the accrued revenue is removed from the accounts receivable section and recorded as cash in the balance sheet.

Related Finance Terms

Sources for More Information

About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More