Accrued Revenue Journal Entry: Earned but Not Yet Billed
Record accrued revenue when services are delivered before invoicing, then clear the accrual when billing happens.
Scenario
At June 30, Maple Advisory completed $4,800 of consulting work not yet billed. The invoice is sent on July 3, and payment is collected on July 20.
Journal Entries
June 30 — Accrue earned revenue at period-end.
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable | $4,800 | |
| Consulting Revenue | $4,800 |
July 3 — Invoice sent. No additional revenue entry needed if accrual was posted correctly; update billing records only.
July 20 — Collect cash from customer.
| Account | Debit | Credit |
|---|---|---|
| Cash | $4,800 | |
| Accounts Receivable | $4,800 |
Explanation
Accrued revenue ensures revenue is recognized in the period the service is performed, not when the invoice is issued or cash is collected. This keeps period reporting aligned with actual performance. The accrual creates a receivable, and later cash collection clears that receivable without creating duplicate revenue.
Variations
If only part of the work is complete, accrue only the earned portion based on a supportable estimate.
Some close processes use reversing entries on day one of the next month to simplify billing-side posting.
Common Mistakes to Avoid
- ✗Waiting until invoice date to recognize revenue earned in the prior period
- ✗Recording revenue again when the invoice is issued, creating double-counted revenue
- ✗Using Unearned Revenue (liability) instead of Accounts Receivable (asset) in accrual scenarios
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Common questions about this journal entry
Accrued revenue is earned before cash receipt (asset). Unearned revenue is cash received before earning it (liability).