Journal Entry for Accrued Revenue
Accrued Revenue is the income which is recognized by the seller but has not been billed to the customer. It is treated as an asset in the balance sheet and it is normal in each and every business. Accrued revenue is often used for accounting purposes to determine the matching concept. Each transaction in business is recorded in the business using journal entry as journal entry lays the foundation of the accounting world. As entry is passed for each and every transaction in the business Accrued revenue also have its own journal entry in the books of accounts. It can be better understood with the help of an example.
In this article, we will try and understand the concept of accrued revenue and also the journal entries and the accounting transactions which is related to it.
Examples of Accrued Revenue Journal Entry
Example #1
XYZ Company is into contracting business and has operations in the middle east and east Africa. The company enters into a contract with JR Associates to build a hotel in Arab. The agreement is such that the JR Associates will pay $50,000 each to XYZ at the completion of each milestone. What is the journal entry for this if the total contract value is $100,000.
The first Journal entry will be –
At the completion of the second milestone, two entries will be recorded one reversal of the initial accrual and another for billing the client.
Example #2
On 31 December 2019 Jeffery an Investment banking firm operating in the United States of America rendered services worth $500 to their client which is in the BPO business and the bank helped in facilitating transaction with them. It was agreed between both the parties that the client will pay for the investment banks service after Jan 2019 and the transaction was not recorded in the books of accounts. Hence, in this case, the following journal entry needs to be passed in the books of accounts
The first Journal entry will be –
Example #3
ABC limited receives an interest income of $1,000 on a bank deposit which they have deposited it in the Abu Dhabi National Bank for the month of December 2010 and n 3rd January 2011. ABC limited is preparing the books of accounts for the year ending 31st December 2010. What accrued entry should the business pass.
The business should record the journal entry in the year itself because it is pertaining to the accounting year ending 31 December 2010. In the books of accounts, the following entry will be passed.
The first Journal entry will be –
And on the 3rd January when the interest is actually received the following entry will be passed in the books of accounts
Example #4
Teleperformance Company which is a French-based company is into consulting business and has operations in the Asian and the Asia Pacific Market. The company enters into a contract with Intelenet Global Services to operate a call center in India. The agreement is such that the company will pay $100,000 each to Teleperformance at the completion of each milestone. What is the journal entry for this if the total contract value is $200,000.
The first Journal entry will be –
At the completion of the second milestone, two entries will be recorded one reversal of the initial accrual and another for billing the client
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