Accrued revenue

Accrued revenue,

Definition of Accrued revenue:

  1. Accrued revenue is the product of accrual accounting and the revenue recognition and matching principles. The revenue recognition principle requires that revenue transactions be recorded in the same accounting period in which they are earned, rather than when the cash payment for the product or service is received. The matching principle is an accounting concept that seeks to tie revenue generated in an accounting period to the expenses incurred to generate that revenue. Under generally accepted accounting principles (GAAP), accrued revenue is recognized when the performing party satisfies a performance obligation. For example, revenue is recognized when a sales transaction is made and the customer takes possession of a good, regardless of whether the customer paid cash or credit at that time.

  2. Accrued revenue is revenue that has been earned by providing a good or service, but for which no cash has been received. Accrued revenues are recorded as receivables on the balance sheet to reflect the amount of money that customers owe the business for the goods or services they purchased.

  3. Revenue earned in the current accounting period, but which will be collected in a subsequent period. Also called unrealized revenue.

How to use Accrued revenue in a sentence?

  1. We needed to determine the accrued revenue of the business, so we could figure out where they were at in relation to us.
  2. We pay our sales force based on accrued revenue to increase motivation, although it means that if the customer doesnt pay, we have to claw back the commission payments when we write off the revenue.
  3. It is commonly used in the service industry, where contracts for services may extend across many accounting periods.
  4. Accrued revenue is recorded with an adjusting journal entry which recognizes items that would otherwise not appear in the financial statements at the end of the period.
  5. Although it was not among their liquid assets, the business counselor took into consideration the companys accrued revenue , before deciding whether to suggest an aggressive fiscal strategy for the next business year, or whether to go with a plan that kept things in a holding pattern for a while.
  6. Accrued revenue is a product of the revenue recognition principle which requires that revenue be recorded in the period in which it is earned.

Meaning of Accrued revenue & Accrued revenue Definition