Definition
Accrued revenue is income a business has earned by delivering goods or services but has not yet invoiced. Under accrual accounting, it is recorded as revenue in the period the work was done, with a matching asset for the amount to be billed. Once the invoice is issued, it moves into accounts receivable.
Also called: Unbilled revenue, Unbilled receivables, Contract asset
Accrued revenue in practice
Accrued revenue is common when billing happens after the work, such as hourly work billed monthly, long projects billed at milestones, and usage-based services billed in arrears.
A large balance of accrued revenue often signals slow invoicing. The sooner work is invoiced, the sooner the payment terms start, so many businesses aim to bill as soon as work or a milestone is complete.
Accrued revenue is the opposite of deferred revenue: accrued revenue is earned but not yet billed, while deferred revenue is billed or paid but not yet earned.
Example
An engineering firm works 120 hours for a client in June at $150 per hour but invoices on July 5. Its June accounts show $18,000 of accrued revenue, which becomes a receivable when the July invoice is sent.
Frequently Asked Questions
Is accrued revenue the same as accounts receivable?
No. Accounts receivable is billed but unpaid. Accrued revenue is earned but not yet billed. Both are assets, and accrued revenue becomes a receivable once invoiced.
Do cash-basis businesses record accrued revenue?
No. Cash-basis accounting records revenue only when payment is received, so earned but unbilled work does not appear in the books.
Related terms
- Deferred revenue Deferred revenue is money a business has received, or invoiced, for goods or services it has not yet delivered.
- Revenue recognition Revenue recognition is the accounting principle that decides when income is recorded in a business's books.
- Accounts receivable Accounts receivable is the total amount of money owed to a business by its clients for invoices that have been issued but not yet paid.
- Billing in arrears Billing in arrears means invoicing a client after goods or services have been delivered for a period, rather than before it starts.
- Accrual basis Accrual basis accounting records revenue when it is earned and invoiced, and expenses when they are incurred, regardless of when cash changes hands.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.