Accrued income is income a business has earned but not yet invoiced, recorded in the period it was earned. At month end you debit an accrued income account, which is a current asset on the balance sheet, and credit sales. When the invoice goes out, the entry is reversed so the income is only counted once. It is also called accrued revenue or unbilled revenue.
Why accrued income matters
Under the accruals basis, income belongs to the period in which it is earned, not the period in which it is invoiced. If March's work is billed in April, March looks too low and April too high. Accrued income puts the income back where it was earned, so each month's management accounts show what the business actually did.
It is the income-side counterpart of an accrual, one of the routine period-end adjustments covered in the ACCA's guide to adjustments.
Accrued income journal: a worked example
A consultancy with a 31 March month end bills a client £3,000 a month in arrears. March's work is complete, but the invoice is raised on 1 April. Figures are before VAT, which is charged on the invoice as usual.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 31 Mar | Accrued income (asset) | £3,000 | |
| 31 Mar | Sales | £3,000 | |
| 1 Apr | Sales | £3,000 | |
| 1 Apr | Accrued income (asset) | £3,000 | |
| 1 Apr | Trade debtors | £3,000 | |
| 1 Apr | Sales | £3,000 |
March now shows £3,000 of sales. On 1 April the reversal and the invoice cancel out, so April's sales aren't inflated by March's work. The accrued income balance goes back to zero and the amount owed sits in trade debtors until the client pays.
For more month-end journals with diagrams, see prepayments and accruals: worked examples.
Common examples of accrued income
- Unbilled work in progress for services, such as hours an accountancy or law firm has worked but not yet billed.
- Fees billed in arrears, such as a monthly retainer invoiced after the month ends.
- Interest receivable on a deposit or loan that has built up but not yet been paid.
- Rent receivable for a period that has passed but not yet been invoiced.
- Milestone contracts where the work done runs ahead of the next billing milestone.
Accrued income vs deferred income
Accrued income and deferred income are opposites. Accrued income is earned before it is billed; deferred income is billed before it is earned. On the cost side, the equivalent of accrued income is an accrual (accrued expense): a liability for a cost incurred before the bill arrives.
| Accrued income | Deferred income | |
|---|---|---|
| Timing | Earned, not yet invoiced | Invoiced or paid, not yet earned |
| Balance sheet | Current asset | Liability |
| Month-end journal | Dr accrued income, Cr sales | Dr debtors or bank, Cr deferred income |
| Typical example | March consulting billed in April | Annual subscription billed up front |
For the cost-side adjustments, use the free prepayments and accruals calculator.
Where accrued income sits on the balance sheet
Accrued income is a current asset, within debtors, because it is normally billed and collected within months. UK accounts often show it on a line called prepayments and accrued income, separate from trade debtors.
How Briefcase Ledger handles accrued income
In Briefcase Ledger, post the month-end entry as a manual journal to an asset account such as Accrued income, which you can add to the chart of accounts. Then reverse it from the journal's page, dated for when the invoice goes out, such as 1 April. Ledger posts the mirror entry on that date and keeps the original in the audit trail.
Agentic Review, in Working Papers, predicts what each profit and loss account should be from the last twelve months, so it flags a missing invoice from a client you bill every month. It asks whether the work went ahead and, from your answer, drafts what follows, such as the accrued income journal, for you to approve before anything posts.
Frequently asked questions
What is accrued income in simple terms?
Accrued income is money you have earned but not yet billed. You record it as income in the month you did the work, with a matching asset, and reverse that entry when you raise the invoice.
Is accrued income an asset or a liability?
An asset, usually a current asset. The business has done the work and is entitled to be paid for it, even though no invoice has gone out yet.
Is accrued income a debit or a credit?
Accrued income is an asset, so it has a debit balance. You debit it and credit sales at month end, then credit it when the entry is reversed on invoicing.
Is accrued income the same as a trade debtor?
No. A trade debtor has already been invoiced; accrued income hasn't. Once the invoice is raised, the amount moves from accrued income into trade debtors.
What is the difference between accrued income and deferred income?
Accrued income is earned before it is billed and is an asset. Deferred income is billed before it is earned and is a liability. One brings income forward to the period it belongs to; the other holds it back.