What Is Accrued Revenue?
Accrued revenue refers to revenue that has been earned through delivering goods or services but not yet billed to the customer and not yet paid. and it recorded under the accrual accounting method to ensure revenues are recognized in the period they are earned, as per the GAAP revenue recognition principle.
Accrued revenue is reported as a current asset on the balance sheet, even though cash has not been received. Once invoiced, it transitions to accounts receivable.
🧠 Key Takeaways
- Accrued revenue is an asset — it represents money earned but not yet billed or collected.
- It follows GAAP and the accrual method of accounting.
- It is the opposite of unearned (deferred) revenue, which is a liability.
- Accrued revenue examples include unbilled sales, services performed but not invoiced, and earned interest income.
📚 Revenue Accruals Journal Entry: Format & Examples
🔹 Example 1: Accrued Revenue for Product Sales (Unbilled)
A business ships $25,500 worth of products on August 31, but invoices the customer on September 1.
📌 Journal Entry at Month-End (August 31):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 2025-08-31 | Accrued Revenue A/c Dr | 25,500.00 | |
| To Sales Revenue | 25,500.00 |
Narration: Being unbilled revenue recorded for products shipped on August 31.
This entry ensures August’s revenue correctly recognized before billing occurs.
🔁 Journal Entry to Reverse Accrued Revenue (On Billing – September 1):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 2025-09-01 | Sales Revenue A/c Dr | 25,500.00 | |
| To Accrued Revenue | 25,500.00 |
Narration: Being reversal of accrued revenue upon billing the customer.
🧾 Standard Journal Entry for Customer Invoice:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 2025-09-01 | Accounts Receivable A/c Dr | 25,500.00 | |
| To Sales Revenue | 25,500.00 |
Narration: Being invoice issued to customer for products delivered.
💵 Journal Entry When Cash is Received:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 2025-09-10 | Cash A/c Dr | 25,500.00 | |
| To Accounts Receivable | 25,500.00 |
Narration: Being cash received from customer for sales invoice.
🔹 Example 2: Accrued Interest Income
A company earns $500 interest in August on loan but receives payment in September.
📌 Accrued Interest Revenue Journal Entry (August 31):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 2025-08-31 | Accrued Interest Income A/c Dr | 500.00 | |
| To Interest Income | 500.00 |
Narration: Being interest income earned but not yet received.
💵 On Receiving Cash (September 5):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 2025-09-05 | Cash A/c Dr | 500.00 | |
| To Accrued Interest Income | 500.00 |
Narration: Being interest income received from borrower.
❓FAQs: Understanding Accrued Revenue
📌 Is Accrued Revenue nSame as Unearned Revenue?
No.
- Accrued revenue = Revenue earned before payment. → Asset
- Unearned revenue = Payment received before earning. → Liability
📌 What’s the Difference Between Accrued Revenue & Accounts Receivable?
- Accrued Revenue: Revenue earned, not yet invoiced
- Accounts Receivable: Revenue earned, already invoiced
Both are current assets, but at different billing stages.
📌 Why Is Accrued Revenue an Asset?
Because it represents future economic benefit—you’ve earned money, but haven’t yet received it. It will convert to cash soon after billing.
📌 What Type of Transactions Use Accrued Revenue?
- Product shipped before billing
- Consulting services completed but not invoiced
- Interest earned but not yet received
- Dividend income earned but not paid
🧾 Recap: Accrued Revenue Journal Entries Summary
| Transaction | Debit Account | Credit Account |
|---|---|---|
| Product/service earned, not billed | Accrued Revenue | Sales Revenue |
| Interest earned but unpaid | Accrued Interest Income | Interest Income |
| Billing customer after accrual | Sales Revenue | Accrued Revenue |
| Issuing invoice | Accounts Receivable | Sales Revenue |
| Cash received from customer | Cash | Accounts Receivable |
| Cash received for interest | Cash | Accrued Interest Income |
🎯 Final Thoughts
Accrued revenue helps match income with correct accounting period, even if cash hasn’t been received. It follows accrual principle in GAAP and is critical for preparing accurate financial statements.
💡 Pro Tip: Use reversing entries to clean up accrued revenue once invoices are issued. This ensures no double-counting.