Accrued income
Accrued income is revenue a business has earned during the period but has not yet invoiced or received in cash, recorded as a current asset under the accrual basis of accounting.
See it move
A tree shows accrued income of €30,000 as the product of a €7,500 monthly fee and 4 months earned but not yet billed. Delta Advisors works under a €90,000, 12-month advisory contract billed every six months in arrears. By its December year-end, four months have passed since the last invoice, so it recognises €30,000 of revenue and a matching current asset, even though no invoice has been sent.
The formula
Variables
- Revenue earned to date in the current billing period (€)
- Amount already invoiced or received for that period (€)
Records revenue in the period it is earned, even before an invoice is issued or cash is received.
Check yourself
A property management firm has a 12-month, €72,000 service contract with a landlord, billed every 3 months in arrears. By the firm's year-end, 2 months have passed since the last invoice was issued, with 1 month remaining before the next invoice is due. How much accrued income should the firm recognise at year-end?