Accrued Revenue Examples

Examples of Accrued Revenue

The most common example of accrued revenue is the interest income (earned on investments but not yet received) and accounts receivables (the amount due to a business for unpaid goods or services.)

The following accrued revenue examples provide an outline of the most common accruals.

Accrued Revenue Examples

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Most Common Examples of Accrued Revenue

Example #1

Example #2

Example #3

  • Suppose Mr. A owns a shop that provides his shop to the shopkeeper on a monthly rent of $ 500. The shopkeeper pays the monthly rent in the first week of next month. It means the landlord, Mr. A does not receive the money in respect of monthly rentals until after the services have been given to the shopkeeper.
  • At the end of the year, Mr. A’s income statement would show only 11 payments from the shopkeeper since the last month’s rent shall be paid in the next month’s first week. But Mr. A already provided the rental services to the shopkeeper in the last month of the year so he should show this earned income as accrued incomeAccrued IncomeAccrued Income is that part of the income which is earned but hasn't been received yet. This income is shown in the balance sheet as accounts more.
  • Accordingly, Mr. A records such transaction in the journal entry by debiting the accrued (revenue) account and crediting the revenue account in the books of account.

Example #4

Example #5

  • Now, in the last example, we should understand the accrued revenue based on journal entries to be passed in the books of accounts.
  • Let’s extend example no 2 cited above, wherein company X provides consultancy services to their clients. Since the above example allows company X to do the billing in June 2019, i.e., at the end of the project amounting to $ 10,000. Company X shall records the following journal entries into their books of accounts:-
Accrued Revenue Example 5-1

In June 2019, when Company X raises the complete invoice to their client, the following entries shall be passed:-

Accrued Revenue Example 5-2

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This article has been a guide to Accrued Revenue Examples. Here we discuss the most common examples to understand the Accrued Revenue along with explanations. You can learn more about accounting from the following articles –

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