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What are accrued revenues and when are they recorded?

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What are accrued revenues and when are they recorded?
posted Jun 30, 2017 by Vijay

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Accrued revenues are fees and interest that have been earned and sales that occurred, but they have not yet been recorded through the normal invoicing paperwork. Since these are not yet in the accountant's general ledger, they will not appear on the financial statements unless an adjusting entry is entered prior to preparing the financial statements.

Here's an example. Your company lent a supplier $100,000 on December 1. The agreement is for the $100,000 to be repaid on February 28 along with $3,000 of interest for the three months of December through February. As of December 31 your company will not have a transaction/invoice/receipt for the interest it is earning since all of the interest is due on February 28. Without an adjusting entry to accrue the revenue it earned in December, your company's financial statements as of December 31 will not be reporting the $1,000 (one-third of the $3,000 of interest) that it has earned in December. In order for the financial statements to be correct on the accrual basis of accounting, the accountant needs to record an adjusting entry dated as of December 31. The adjusting entry will consist of a debit of $1,000 to Interest Receivable (a balance sheet account) and a credit of $1,000 to Interest Income or Interest Revenue (income statement accounts).

answer Jul 1, 2017 by Swati Tyagi
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