Accrued Income

What Is Accrued Income?

Accrued income falls under the accrual method of accounting because the income has been earned by the company on a particular date however it has not been received on the same date. Therefore, such income is treated in a different way than regular income. This method of accounting states that income earned in an accounting period should be realized in the same accounting period and not in a separate accounting period. This is done to match the costs with the incomes of the same period.

Accounting Treatment

Due to the fact that accrued income applies to the same accounting period it is earned in, we must record it in the same period. To do so, we debit the accrued income account and credit the income account. The balance from the accrued income account is written off once the income is actually received by debiting the bank or cash account and crediting the income accrued account.

Accrued Income vs Accrued Revenue

Accrued income and accrued revenue are often interpreted as the same, however, this is not the case as accrued income is often observed as the income earned through investing activities whilst accrued revenue is the amount generated from general business activities that involve selling goods or services.