Accrued income refers to income that a business has earned but has not yet received or been billed for. This income is recorded in the company’s financial statements as an asset on the balance sheet, and the corresponding expense is recorded on the income statement. The income is recorded when it is earned, regardless of when payment is received.
Examples of accrued income include:
- Sales made on credit terms where payment has not yet been received
- Interest earned on investments but not yet received
- Rent earned on properties but not yet collected
- Service fees earned by a company but not yet invoiced to the customer
Accrued income is important to track because it represents a future inflow of cash that a business can expect to receive. It also helps companies to make accurate financial statement and forecasting, they can take these earned but not yet received income into account when making financial decision.
