Accrued Revenue

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Definition of 'Accrued Revenue'

Accrued revenue is the revenue that a company has earned but has not yet received. It is recorded on the company's balance sheet as an asset. Accrued revenue is created when a company provides a product or service to a customer but does not receive payment immediately. For example, a company that sells goods on credit will record the sale as an accrued revenue until the customer pays for the goods.

Accrued revenue is important because it helps companies to accurately reflect their financial performance. By recording accrued revenue, companies can ensure that they are not overstating their profits. Accrued revenue can also be used to estimate future cash flows. For example, a company that knows how much accrued revenue it has can estimate how much cash it will receive in the future.

There are two main types of accrued revenue:

* Accounts receivable: This is the amount of money that a company is owed by its customers. Accounts receivable are created when a company sells goods or services on credit.
* Deferred revenue: This is the amount of money that a company has received in advance for goods or services that have not yet been provided. Deferred revenue is created when a company receives payment for goods or services that will be provided in the future.

Accrued revenue is an important concept for understanding how companies account for their revenue. By understanding accrued revenue, you can better understand a company's financial performance and cash flows.

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