Accrued revenue, also known as accrued assets or unbilled revenue, refers to revenue that a company has earned but has not yet received in cash or recorded in its accounts. This occurs when goods or services are provided to a customer, and the payment is expected to be received at a later date. The recognition of accrued revenue is in line with the accrual accounting method, which aims to match revenues with the expenses incurred to generate those revenues.

Here’s how accrued revenue is recognized and accounted for:

1. **Recognition of the Revenue:**
– When a company has earned revenue but has not yet received the cash, the company recognizes the revenue in its financial records. This is typically done by recording an adjusting journal entry.

2. **Adjusting Journal Entry for Accrued Revenue:**
– Debit an asset account (often called “Accounts Receivable” or a specific receivable account) on the balance sheet to recognize the right to receive payment.
– Credit the corresponding revenue account on the income statement to recognize the earned revenue.

3. **Receipt of the Accrued Revenue:**
– When the company eventually receives the cash, a second journal entry is made.
– Debit the Cash account to increase the cash balance.
– Credit the Accounts Receivable or other relevant asset account to reflect the reduction in the right to receive payment.

Common examples of accrued revenue include:

– **Services Rendered:** If a company provides services but has not yet billed the customer by the end of the accounting period.
– **Interest Earned:** Interest income that has been earned on loans or investments but has not yet been received.
– **Rent Earned:** Rental income that has been earned but not yet collected.

Accrued revenue is important for accurately reflecting a company’s financial performance during a specific period. It ensures that revenue is recognized when it is earned, even if the actual cash payment has not been received. This is in contrast to the cash accounting method, where revenue is recognized only when cash is received. Accrual accounting provides a more comprehensive view of a company’s financial position and performance by considering all economic events, whether or not cash has changed hands.