5. Accrued Revenue

What are accrued revenues?

Revenues earned in a period that are both unrecorded and not yet received in cash (or other assets).

What is an example of when accrued revenues would occur?

A technician who bills customers after the job is done. If one-third of a job is complete by the end of a period, then the technician must record one-third of the expected billing as revenue in that period - even though there is no billing or collection.

Describe accrued revenues in a simple way.

Revenue that has been earned but not yet received in cash or other assets.

What else is accrued revenues called?

accrued assets

What is the adjusting entry for accrued revenues?

Increase a revenue account and increase an asset account. The asset is usually accounts receivable and the revenue is the specific revenue such as Services Revenue.

What does accrued revenue usually come from?

services, products, interest, and rent.

When are accrued revenues recorded?

When adjusting entries are made at the end of the accounting period. These accrued revenues are earned but unrecorded because either the buyer has not yet paid or the seller has not yet billed the buyer.

Review example under accrued services revenue.

Review for Accrued Interest Revenue

If a company is holding notes receivable that produce interest revenue, we must adjust the accounts to record any earned and yet uncollected interest revenue. The adjusting entry is similar to the one for accruing services revenue. Specifically, debit Interest Receivable (asset) and credit Interest Revenue.

Accrued revenues at the end of one accounting period result in...

cash receipts in a future period(s).

Review example under Future Cash Receipt of Accrued Revenues

Review Need-To-Know 3-4