Accrued Revenue

Accrued revenue is income a business has earned by delivering goods or services that it has not yet billed or received payment for. Under accrual accounting, the revenue is recognized in the period the work was completed - not when the invoice is raised or the cash arrives. It appears on the balance sheet as a current asset, typically grouped near accounts receivable, until the customer is invoiced and the balance clears.

How Accrued Revenue Affects Financial Reporting

Project-based businesses frequently complete work ahead of billing cycles. A roofing contractor who finishes a stage in October but raises the invoice in November has earned that revenue in October - even if payment won't arrive until December. Recording it as accrued revenue in October ensures the income statement reflects actual output, rather than billing dates.

Without accrued revenue, reported profits follow invoice schedules rather than underlying performance. A business completing a large contract in one quarter but invoicing in the next will understate the first period and overstate the second. Over time, this makes revenue trend lines unreliable and can mislead month-on-month comparisons. Accrual accounting corrects for this by matching revenue to the period it was earned.

The balance clears when an invoice is raised: the accrued entry is reversed, and the amount moves to accounts receivable. If the final invoice differs from the amount accrued, the difference is recognized in the period the invoice is sent.

Accrued Revenue vs. Deferred Revenue

Accrued revenue and deferred revenue are mirror images. Accrued revenue is earned but not yet billed - treated as an asset because payment is owed to the business. Deferred revenue is billed or received but not yet earned - treated as a liability because the business still owes the customer the goods or services.

A solar installer who accepts a deposit before commissioning a system holds deferred revenue. Once the system is live but the final invoice has not yet been raised, the remaining balance shifts to accrued revenue. Both conditions can exist on the same balance sheet at the same time, under different jobs.

For project businesses using Zigaflow, invoices raised against a completed job convert accrued revenue into live receivables, keeping the financial picture current without waiting for the next billing run.