Accrued revenue is the income that has been recognized but not collected for some reason. It means, in literal terms, that a product or service has been delivered to the customer but the billing for the service has not yet been processed.

You can also state as, a company CTG promise to pay all amount in Promise date, but the company provides goods or service before the date.

See Must:- Adjusting Entry for Unearned Income

Example

A Company LABTECH promise to pay $5000 on January 12, 2018, to Company ABTECH for their service charges. But Company ABTECH provides complete service in SEP 25 2017, so the period between SEP to January is unearned and Company LABTECH is liable to pay promise amount and act as the creditor.

Date Description PR Amount
2018 DR CR
JAN 12 Accounts ReceivableRevenue $5000
                      $5000

IF Interest Apply?

Some cases interest must apply according to terms and condition, in which agreed both parties, so if 20% interest rate applies in Above case then what is the Final Accrued revenue of Company ABTECH?

Date Description PR Amount
2018 DR CR
JAN 12 Accounts ReceivableRevenue $5000
                      $5000
Till Date Interest Apply 20%
Total Income ?

There can be a number of reasons why this happens, for example, if a company offers a service for which the payment has not been made is accrued revenue.

If a consumer owes 5% interest to a service and the payment has not been made yet. It is added to the accrued revenue at the end of each accounting period.

How is Accrued Revenue Adjusted?

Another example is that a garage offers maintenance services for a client’s vehicles in the last week of July, but the amount is paid in the first week of August.

If the work is worth $200, then $200 is an accrued revenue and it is recognized in July but paid off in August.

Therefore, the given amount is credited to the accounting records of one period and debited from the accounting records of another period.

Example

This is done entering the amount of $200 in the accounting records of April as credit revenue. Then he makes an adjusting entry in the accounting records of August to debit the amount as revenue.

There are some accounting records that do not include adjusting entries for accrued revenues.  They tackle the problem by understating total assets, total revenues or the earned income to a given amount.

Conclusion

So still issue in understanding the concept of Adjusting Entry for Accrued Revenue. Just Contact out Team, and we will provide the best solution for this equation.

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