JournaldrillAccrued revenue
Accrued revenue is revenue you have earned by the end of the period but have not yet billed or collected. The adjusting entry debits Accounts Receivable (or Accrued Revenue Receivable) and credits Service Revenue, so the income statement shows the revenue in the period it was earned.
Syntax
Dr Accounts Receivable (or Interest Receivable) / Cr Service Revenue (or Interest Revenue)| Part | What it is |
|---|---|
Accounts Receivable / Accrued Revenue Receivable | Asset debited for the amount earned and still unbilled. |
Service Revenue / Interest Revenue | Revenue credited for work done or interest earned in the period. |
Examples
Dec 31: Dr Accounts Receivable 2,500 / Cr Service Revenue 2,500Result: Assets up 2,500, revenue up 2,500
Consulting work completed in December that will be invoiced in January.
Jan 15 collection: Dr Cash 2,500 / Cr Accounts Receivable 2,500Result: Cash up 2,500, receivable cleared, no new revenue
The revenue was recognized in December.
Dr Interest Receivable 300 / Cr Interest Revenue 300Result: Assets up 300, revenue up 300
Interest earned on a loan to a customer, to be received next quarter.
Common mistakes
- Waiting for the invoice date to record the revenue: under accrual accounting the work being done is what triggers revenue, not the paperwork.
- Recording the revenue again when the invoice is sent: once accrued, the invoice only moves the amount between receivable accounts if at all.
- Confusing accrued revenue with unearned revenue: accrued means earned but not received; unearned means received but not earned.
Practice Accrued revenue
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- Accrued service revenueSterling Bookkeeping Services completed $2,350 of payroll work for a client during December. The invoice will not be sent until January 5. Record the adjusting entry on December 31.
Questions
What is the difference between accrued revenue and accounts receivable?
Accrued revenue is earned but not yet billed; once invoiced it becomes an ordinary account receivable. Many small companies debit Accounts Receivable directly for both.
Is accrued revenue an asset?
Yes. The receivable created by the accrual is a current asset.
Related
- Unearned revenueHow to record a customer prepayment as a liability (Dr Cash, Cr Unearned Revenue) and recognize revenue as earned (Dr Unearned Revenue, Cr Revenue).
- Sale on accountHow to record a sale on credit: debit Accounts Receivable, credit Sales or Service Revenue, plus the cost of goods sold entry and the later collection.
- Accrued interestHow to accrue interest on a note at period end: Dr Interest Expense, Cr Interest Payable (borrower) or Dr Interest Receivable, Cr Interest Revenue (lender).
- Accrued wagesHow to record wages employees earned by period end but are paid later: Dr Wages Expense, Cr Wages Payable. With the payday entry and reversing entry.