Accrued Revenue
Accrued revenue is income your business has earned by delivering goods or services but hasn't invoiced or collected yet. It's the revenue equivalent of accrued expenses — the work is done, the money is owed, but no bill has gone out. Accrued revenue appears as a current asset on your balance sheet.
Accrued Revenue Definition
Accrued revenue is income your business has earned by delivering goods or services but hasn't invoiced or collected yet. It's the revenue equivalent of accrued expenses — the work is done, the money is owed, but no bill has gone out. Accrued revenue appears as a current asset on your balance sheet.
Accrued Revenue in Practice — Example
You run a consulting firm and have a retainer client paying $6,000 quarterly. The quarter ends March 31st, but you don't invoice until April 5th and won't get paid until April 20th. You performed consulting work throughout Q1, so by March 31st, you've earned $6,000 in revenue that hasn't been invoiced. You record an adjusting entry: debit accrued revenue (asset), credit consulting revenue (income). When you invoice in April, you reverse the accrual and create a normal receivable.
Why Accrued Revenue Matters for Your Books
Without accruing revenue, your financial statements understate income in periods when you did the work and overstate it in periods when you invoiced. This makes it impossible to gauge true monthly or quarterly performance.
For project-based businesses, accrued revenue is critical for matching revenue to the period work was performed. If you complete 80% of a $50,000 project in March but don't invoice until April, your March financials look artificially weak while April looks artificially strong.
Accrued revenue also affects your balance sheet. It represents a real asset — money someone owes you for work completed. Lenders and investors want to see this captured accurately because it reflects your true financial position.
How Accrued Revenue Shows Up in QuickBooks
QBO doesn't have a built-in accrued revenue feature, so you'll use journal entries. Create an "Accrued Revenue" account under Other Current Assets. At period-end, debit Accrued Revenue and credit the appropriate income account. When you create the invoice, reverse the accrual. You'll see the balance on the Balance Sheet report under Current Assets. This is a common month-end close task for bookkeepers.
Common Mistakes
FAQ
Q: Is accrued revenue the same as deferred revenue? A: No — they're opposites. Accrued revenue is earned but not yet billed. Deferred revenue is billed (or collected) but not yet earned.
Q: Does accrued revenue apply to cash-basis businesses? A: No. Cash basis recognizes revenue only when payment is received. Accrued revenue is strictly an accrual-basis concept.
Related Terms
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