Accrued Revenue

Accrued revenue is revenue that has been earned by providing goods or services, but for which no cash has been received and an invoice has not yet been issued. It is recorded as a journal entry to ensure financial statements accurately reflect the company's performance in a specific period, adhering to the accrual basis of accounting.

This concept is critical for proper revenue recognition, as it matches revenues to the period in which they are earned, regardless of when payment is collected. For example, a company completing a multi-month project may recognize a portion of the total contract value each month as work is completed, even if they only bill the client upon final delivery. This entry appears as an asset on the balance sheet until the invoice is sent, at which point it is converted to an accounts receivable.