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On the other hand, accounts receivables represent the amount due from the other party on account of sale of goods or services for which an invoice has been raised. It canвЂ™t be considered as a liquid asset since it can normally be converted into cash only when an invoice is raised upon the other party. It is booked as an asset in the balance sheet and remains to reflect as accrued revenue receivables until an invoice can be raised. Difference Between Accrued Revenue and Accounts ReceivableДЄccrued revenue represents that portion of revenue on account of sale of goods or rendering of services for which the billing is not done due to other pending performance obligations in a project. The opposite treatment for accrued expenses and liability will be done by the counterparty. As per the example that we discussed above, the journal entry for accrued revenue shall be as follows: Dr. Accrued revenue income is credited and shown on the credit side of the income statement and accrued income receivables is debited which is shown on the asset side of the balance sheet. They are recorded as receivables and form part of the assets in the balance sheet.ДЄccrued revenue is recorded as an adjusting entry in the financial statements. Accrued Revenue in Balance SheetДЄccrued revenue income in shown in the statement of profit and loss, and the accrued revenue receivable is shown in the balance sheet as an asset.

When the first floor is completed, accrued revenue will be booked by an amount of $3,00,000. Let us say the total contract amount for the building is $9,00,000. When all the floors are constructed then all the performance obligations will be completed and accrued revenue will get transformed to trade receivables. Every time a floor is completed it will give rise to the completion of a single performance obligation and the construction company can book the revenue proportionate to a single floor as accrued revenue. In this case, the performance obligation is to create three floors. Let us take an example of a construction project in which three floors are to be build by the builder in the form of a commercial property.

As soon as all the obligations are completed billing is done and actual trade receivables are booked against accrued revenue. The same is as per accounting treatment specified as per GAAP. In such cases, income is recorded as and when performance obligations as set out in the agreement between the parties are completed. The concept is more relevant to service industries where the project continues for more than one accounting period.

#Workdone revenue free

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