Accrued revenue is income that has been earned but not yet received. This type of revenue is common in service-based businesses, where customers may be invoiced after the work has been completed. Accrued revenue can also occur when goods are shipped but not yet paid for. In either case, the company records the revenue on its balance sheet as an accrued liability until it receives payment.
How is accrued revenue recorded?
Accrued revenue is recorded as a liability on a company's balance sheet. This is because the revenue has been earned but not yet received, so the company does not have the cash to record it as an asset. The amount of accrued revenue can be calculated by adding up all of the invoices that have been sent out but have not yet been paid.
What decisions can be made using accrued revenue data?
Accrued revenue data can be used to make decisions about cash flow and working capital. For example, if a company has a lot of accrued revenue, it may need to increase its borrowing or invest more in accounts receivable to cover the amount owed to customers. Accrued revenue can also be used to assess the financial health of a company and its ability to meet its obligations.