Accrued income
Also known as: accrued revenue, income receivable
Accrued income is income a business has earned during an accounting period but has not yet received or invoiced by the period's end. Under accrual accounting it is recognized as revenue and recorded as a current asset.
Accrued income is income that has been earned but not yet received by the end of an accounting period. It arises whenever the timing of cash lags the delivery of goods or services — for example, interest that has built up on a deposit but has not been paid, rent a tenant owes for a month already occupied, or commission earned on a completed sale that will be settled next period.
The concept follows directly from the accruals basis of accounting: revenue is recognized in the period it is earned, not the period the cash arrives. Suppose a company sublets office space for 300 per month and the tenant has not yet paid for December when the year closes. The company records an adjusting entry debiting accrued income (a current asset, sometimes shown as income receivable) and crediting the income account for 300. The year's income statement then reflects the full amount earned, and the statement of financial position shows the 300 still owed.
When the cash is received in the next period, the receivable is cleared rather than income being counted twice. Accrued income is the mirror image of deferred (or unearned) income, which is cash received before it has been earned and is carried as a liability until the related work is done.
Accruals and prepayments are a core topic on the ACCA Financial Accounting (FA) exam. Expect questions asking you to compute the adjusting entry, classify accrued income as an asset versus deferred income as a liability, and work out the income statement figure from opening and closing accrual balances.
Key takeaways
- Accrued income is income earned in a period but not yet received or invoiced by period end.
- It is recorded with a debit to a current asset (income receivable) and a credit to income.
- It is the opposite of deferred income, which is cash received before it is earned and sits as a liability.
- The adjustment ensures the income statement reflects what was earned, matching the accruals concept tested on the ACCA FA exam.