Accrued Revenue is Also Known as Accrued Income – Full Guide

• 2025-05-06 17:01:01
• admin

In accounting, accrued revenue is a concept that ensures financial reports accurately reflect income earned during a period, even if the payment has not yet been received. It is a key part of accrual accounting and is especially important for service providers, subscription-based companies, and B2B businesses.

In this blog, we will explain

What is accrued revenue

How it differs from other revenue recognition methods

Types of revenue recognition

How OBG Outsourcing supports businesses in managing revenue recognition accurately
 

1 What is Accrued Revenue

Accrued revenue also known as accrued income refers to income that has been earned by providing goods or services but has not yet been billed or collected by the end of the accounting period.

Example
If a business completes a service on March 28 but invoices the client in April, the income is recorded in March under accrued revenue. This is because the revenue was earned in March.

In accounting terms, accrued revenue is recorded as an asset on the balance sheet until it is converted into cash or invoiced.

2 How Accrued Revenue Differs from Other Revenue Recognition Methods

The main difference is based on the timing of when revenue is recognized

Accrued Revenue
Recognized when goods or services are delivered even if cash is not received

Cash Accounting
Recognized only when cash is received

Deferred Revenue
Cash is received before goods or services are delivered and recorded as a liability until earned

Accrued revenue aligns with the matching principle which ensures expenses and revenues are recorded in the same period for accuracy. Cash accounting might understate income for service-heavy businesses. Deferred revenue is the opposite of accrued revenue and applies when advance payments are received.

3 Types of Revenue Recognition

There are different methods depending on the business model

Accrual-Based Recognition
Used in most businesses where income is recorded when earned

Cash-Based Recognition
Revenue is recorded only when money is received

Percentage of Completion Method
Common in construction and long-term projects where revenue is recognized based on project milestones

Completed Contract Method
Used when revenue is recorded only after the full completion of the project

Sales-Based Recognition
Revenue is recognized at the point of sale often used in retail and ecommerce

4 How OBG Outsourcing Assists with Revenue Recognition

OBG Outsourcing provides end-to-end accounting services with deep experience in revenue recognition and compliance. Here is how we support our clients

Accrual Accounting Support
We help businesses set up and maintain accurate accrual accounting systems including proper treatment of accrued and deferred revenue

Customized Financial Setup
Our experts create a custom chart of accounts tailored to your revenue sources and reporting requirements

Software Integration
We work with platforms like QuickBooks Xero Zoho Books and NetSuite to automate revenue tracking from invoicing to reporting

eCommerce and SaaS Support
Our team has specialized knowledge in subscription models ecommerce platforms and sales-based revenue recognition

GAAP and IFRS Compliance
We ensure your revenue recognition aligns with accounting standards in your region such as US GAAP or international IFRS

Fractional CFO Services
We provide revenue analysis financial forecasting and reporting solutions that prepare you for audits funding or investor reporting

Conclusion

Accrued revenue or accrued income is essential to presenting a clear picture of business income in financial reports. Businesses must choose the right revenue recognition method based on their operations and ensure accuracy to avoid compliance risks.

OBG Outsourcing helps businesses of all sizes manage this complexity through expert bookkeeping tax support and compliance solutions.

Contact OBG Outsourcing today to streamline your accounting and gain confidence in your financial reporting.

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