---
title: "Accrued revenue: Definition, examples, and journal entry"
description: "Accrued revenue is revenue earned but not yet invoiced. See the journal entry, examples, and how it differs from deferred revenue and receivables."
url: https://emptyspaces.ai/resources/blog/accrued-revenue
language: en
---

[Blog](https://emptyspaces.ai/resources/blog) Glossary

# Accrued revenue: Definition, examples, and journal entry

Published October 20, 2026 10 min read

Key takeaways

- Accrued revenue is revenue your company has earned but hasn't invoiced by the end of the period, and it sits on the balance sheet as a current asset until you bill the customer.
- In the worked example below, a software company with about $120 million in revenue accrues $325,600 across four revenue types in October, and the November invoices come in $5,640 lower.
- Under ASC 606, an accrued amount is a receivable when “only the passage of time is required” before payment is due, and a contract asset when payment still depends on something else, such as a milestone.

Accrued revenue is revenue your company has earned by delivering goods or services but hasn't invoiced by the end of the period, such as usage billed in arrears. Getting accrued revenue right gives you an accurate monthly income statement, catches revenue you'd otherwise miss, and keeps unsupported estimates out of your results. This guide covers the definition, the journal entry, accrued vs deferred revenue and receivables, how to calculate it, and one company's month-end schedule.

## What is accrued revenue?

In simple terms, accrued revenue means revenue you've earned but haven't billed yet. You record it in the month you earn it, with a debit to an asset and a credit to revenue, so each month's revenue stays in the month you delivered the work.

- **Accrued revenue** Revenue earned in the period but not yet invoiced at period-end, also called accrued income or unbilled revenue
- **Unbilled receivable** The asset you record when only invoicing and time stand between you and payment
- **Contract asset** The asset you record when payment still depends on something else, such as a milestone or customer acceptance

Accrued revenue is one of the two types of accruals. The other is accrued expenses, which record costs you've incurred but haven't been billed for. Accrued revenue is an asset, and accrued expenses are a liability.

## Is accrued revenue an asset or a liability?

Accrued revenue is an asset, and because you normally bill and collect it within a year, it's a current asset. Knowing where it sits tells you how to record it and how to explain it to reviewers.

Accrued revenue carries a debit balance. On the balance sheet, it appears under current assets, often as “unbilled receivables,” “accrued revenue,” or “contract assets,” and some companies include unbilled amounts within accounts receivable.

The other side of the entry is revenue on the income statement, so an accrual raises the month's revenue and assets by the same amount. Cash doesn't move until the customer pays.

## What are examples of accrued revenue?

Typical accrued revenue at a mid-sized company comes from work delivered in one month and billed in the next. Listing your recurring sources helps your team check each one every month.

| Accrued revenue | Why it's unbilled at month-end | Basis for the amount |
| --------------------------------------- | ---------------------------------------- | ------------------------------- |
| Usage fees billed in arrears | The invoice runs after the usage month | Usage export at cutoff |
| Time and materials services | Timesheets are billed after month-end | Approved hours × contract rate |
| Fixed-fee projects recognized over time | Billing follows milestones, not progress | Progress measure × contract fee |
| Delivered milestones awaiting invoice | The invoice runs on a billing calendar | Contract milestone amount |
| Interest on deposits or notes | Paid monthly, quarterly, or at maturity | Balance × rate × time |
| Rent or royalties earned | Billed or reported after the period | Lease terms or licensee reports |

## What is the journal entry for accrued revenue?

The journal entry for accrued revenue is a month-end adjusting entry that debits accrued revenue, or unbilled receivables, and credits revenue. Following it through to the invoice shows how a reversal on day one keeps the revenue from being counted twice.

Example

Your implementation team works 620 billable hours in October at $210 an hour. The invoice goes out on November 6, after the project manager writes off 40 hours, so it bills 580 hours, or $121,800.

| Account | Debit | Credit |
| -------------------- | -------- | -------- |
| Oct 31 | | |
| Unbilled receivables | $130,200 | |
| Services revenue | | $130,200 |
| Nov 1 | | |
| Services revenue | $130,200 | |
| Unbilled receivables | | $130,200 |
| Nov 6 | | |
| Accounts receivable | $121,800 | |
| Services revenue | | $121,800 |

October carries $130,200 of revenue (620 × $210). In November, the reversal and the invoice net to −$8,400 ($121,800 − $130,200), so the write-off lands in November's revenue. ERPs such as NetSuite let you set a reversal date on the original entry, so the November 1 entry posts automatically.

An illustration of journal entry RB-4C27E9, prepared by the Close Agent: a $130,200.00 October implementation revenue accrual, debit 13100 and credit 40200, reversing on November 1, with the revenue accrual schedule attached, waiting on the Controller's approval. Demo data.

If you don't reverse, clear the accrual when you invoice instead. Debit accounts receivable and credit unbilled receivables for $121,800, then debit services revenue and credit unbilled receivables for the remaining $8,400. Either method works if you use it consistently.

For payroll, prepaid, and other month-end entries, see [Month-end journal entries: Examples and what to review](https://emptyspaces.ai/resources/blog/month-end-journal-entries).

## What is the difference between accrued revenue, deferred revenue, and accounts receivable?

Accrued revenue is earned but not yet invoiced, accounts receivable is invoiced but not yet paid, and deferred revenue is billed or paid before you've earned it. The first two are assets and deferred revenue is a liability, so mixing them up misstates both sides of the balance sheet.

| Compared | Accrued revenue (unbilled receivable) | Accounts receivable | Contract asset | Deferred revenue |
| ---------------- | ------------------------------------- | ------------------- | ---------------------------------------- | ------------------------------------ |
| Revenue earned? | Yes | Not necessarily | Yes | Not yet |
| Invoice sent? | No | Yes | No | Yes, or paid in advance |
| Right to payment | Unconditional, waiting on the invoice | Unconditional | Conditional on a milestone or acceptance | Customer has paid or owes in advance |
| Balance sheet | Current asset | Current asset | Current asset | Current liability |
| Clears when | Invoiced, reversed, or written off | The customer pays | The condition is met and you invoice | You deliver and recognize revenue |

An easy way to remember the difference: accrued revenue is earned first and billed later, and deferred revenue is billed first and earned later.

Under ASC 606, the label in your general ledger doesn't decide the classification. A right to payment is a receivable when “only the passage of time is required” before payment is due (ASC 606-10-45-4). When payment still depends on something else, such as customer acceptance, the amount is a contract asset and is presented separately.

## How do you calculate accrued revenue?

You calculate accrued revenue from the best evidence of what you delivered by month-end: usage data, approved hours, progress against the contract, or the contract rate. Matching the method to the revenue type gives your reviewer a basis they can test.

| Revenue type | Evidence at cutoff | Calculation |
| ------------------------------ | ----------------------------------------------- | -------------------------------------------------------- |
| Usage billed in arrears | Usage export from the billing or product system | Units × contract rate − credits − amounts already billed |
| Time and materials | Approved timesheets | Hours × rate, less hours you expect to write off |
| Fixed fee recognized over time | Hours or costs against budget | Percent complete × fee − amounts already billed |
| Milestone delivered | Delivery or acceptance record | Milestone amount from the contract |
| Interest | Balance and rate | Balance × annual rate ÷ 12, or × days ÷ 365 |

Record the basis next to each amount, so the reviewer can test it and next month's preparer can repeat it.

## Example: One company's month-end accrued revenue schedule

A single schedule for all revenue accruals gives your reviewer one place to check each amount, its basis, and its classification.

Example

A B2B software company with about $120 million in annual revenue closes October 2026.

| Accrual | Basis | Calculation | Amount | Classification |
| --------------------------------------------- | -------------------- | ----------------------- | -------- | ------------------- |
| Compute usage, billed in arrears | Usage export | 46,000 hours × $2.40 | $110,400 | Unbilled receivable |
| Implementation, time and materials | Approved timesheets | 620 hours × $210 | $130,200 | Unbilled receivable |
| Fixed-fee data migration, billable at go-live | Hours against budget | 60% × $90,000 | $54,000 | Contract asset |
| Interest on cash deposits | Bank rate | $9,300,000 × 4.00% ÷ 12 | $31,000 | Interest receivable |
| Total | | | $325,600 | |

The migration line is a contract asset because the customer owes nothing until go-live. The interest line is outside ASC 606, but it sits on the same schedule because it's earned and unbilled.

When the November invoices go out, the team compares each one with its accrual:

| Accrual | Accrued | Invoiced | Difference | Change for next month |
| -------------- | -------- | ---------- | ---------- | -------------------------------------------------------- |
| Compute usage | $110,400 | $113,160 | $2,760 | Pull usage after the platform finalizes late events |
| Implementation | $130,200 | $121,800 | −$8,400 | Confirm write-offs with project managers before accruing |
| Data migration | $54,000 | Not billed | n/a | Go-live is set for December, so the balance stays |
| Interest | $31,000 | Not billed | n/a | The bank pays on December 31 |

The differences net to −$5,640 ($2,760 − $8,400), and they land in November's revenue. The implementation accrual was 6% too high (−$8,400 ÷ $130,200), so the basis changes, not just the number.

An illustration of the Close Agent's match of October's revenue accruals to the November invoices: implementation over-accrued by $8,400.00 against invoice INV-7032, a $2,760.00 compute usage difference against INV-7041, and a $54,000.00 contract asset not yet billable, each with its source and reference. Demo data.

## Does accrued revenue affect cash flow?

Accrued revenue raises revenue and net income without bringing in cash, so it lowers operating cash flow relative to net income until you collect. Tracking the change explains why profit and cash don't move together.

On a cash flow statement prepared with the indirect method, an increase in accrued revenue is subtracted from net income. In the example, unbilled receivables, contract assets, and interest receivable rise from $268,000 at September 30 to $325,600 at October 31. That $57,600 increase ($325,600 − $268,000) reduces October's operating cash flow.

## What are common mistakes with accrued revenue?

The mistakes to check for are revenue accrued before it's earned, revenue counted twice, and balances that never clear. Checking for each one before sign-off is cheaper than finding it in an audit.

- **Over-accruing** Accruing on a signed contract or a forecast instead of evidence of delivery, or accruing hours that will be written off
- **Double counting** Leaving an accrual in place when the invoice posts revenue, or accruing manually on top of a billing system that already recognized the amount
- **Stale balances** Unbilled lines older than one billing cycle, which often mean a dispute, a missed invoice, or revenue that should be reversed
- **Wrong classification** Presenting a conditional amount, such as a milestone awaiting acceptance, as a receivable instead of a contract asset
- **Negative balances** A credit balance in accrued revenue after close, which often means an invoice and a reversal cleared the same amount
- **No support** Round estimates with no usage file, timesheet, or progress calculation behind them

Two monthly checks catch these early. Each month, match every accrued line to the invoice that followed and explain the difference. Then review the age of every unbilled balance and clear anything with no billing date.

For where revenue accruals sit in the close, see [Month-end close process](https://emptyspaces.ai/resources/blog/month-end-close-process). For each task with its owner and reviewer, see [Month-end close checklist](https://emptyspaces.ai/resources/blog/month-end-close-checklist). For the expense side, see [Accrued expenses: Definition, examples, and journal entry](https://emptyspaces.ai/resources/blog/accrued-expenses).

If you're new to the close, start with [What is month-end close?](https://emptyspaces.ai/resources/blog/month-end-close)

## How we approach it

Our Close Agent prepares revenue accruals as tasks on your close checklist. It builds each accrual from the source records, attaches the workpaper, and drafts the journal entry with its reversal for a named approver. Nothing posts until that person approves it. If you want your month-end accruals prepared before your team starts on them, explore [our Close Agent](https://emptyspaces.ai/product/close).

An illustration of the revenue group of an October 2026 close checklist: the revenue accrual schedule in review, the match of prior-month accruals to invoices and the interest income accrual signed off, and the contract asset aging in progress, each prepared by the Close Agent with a named reviewer. Demo data.

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