MASTERCLASS Investment – What is Accrued Revenue / Sales / Income?

MASTERCLASS Investment – What is Accrued Revenue / Sales / Income?

Investment – What is Accrued Revenue / Sales / Income?

Revenue is the amount of sales a company actually makes over a specific period, including discounts and deductions for returned sales, etc. It is the “top line” or “gross income” figure from which costs of goods are subtracted to determine gross profit.

Accrued revenue is revenue for goods or services that have been sold or completed but may have not yet been billed (sometimes) and/or paid for. Accrued revenue is income that has been raised but not received, for example billing for monthly rent that is due in arrears, or following the monthly rental period. The income has been earned and accrued (since an individual or company rented the item) but the revenue has not been received.

It is recorded on the Balance Sheet as an asset account.

This is important to the valuation of a company, particularly in the service industry, where invoicing/billing typically occurs after the work or service is complete. Without this on financial reports, the company would appear to have much lower revenues, and may not have a fair method to balance expenses associated with the revenue accrued.

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