What Is Accrued Revenue?

By Mike Price – Updated Jun 11, 2025 at 11:50 PM

Key Points

Accrual accounting allows a business to record revenue before cash is collected.
Investigate changes in accounts receivable on the cash flow statement to evaluate real cash status.
Monitor allowance for doubtful accounts for signs of credit risk or uncollectible ARs.

Accrued revenue can be a difficult concept to understand when you start analyzing financial statements. It is the amount of revenue that a business has earned but not collected cash for. The business will report the revenue on its income statement and on its balance sheet with an asset until the revenue is collected.

Businesses must account for revenue this way because of accrual accounting. Let’s talk about what that is, how it works, and when to be nervous about too much accrued revenue.

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Piggy bank on a calculator. — Image source: Getty Images

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Account	Debit	Credit
Accounts Receivable	$10,000
Revenue		$10,000

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Revenue is reported on the income statement the same regardless of whether it is accrued revenue or cash revenue. There are two ways to find what portion of revenue is accrued revenue: Subtract the changes in accounts receivable from revenue and look for a breakout of revenue and credit revenue in the footnotes to the annual report. There won’t always be a breakout in the footnotes, but you should be able to find the change in ARs on the cash flow statement.

The second part of the sales transaction is when the receivable account is collected. Here’s what that looks like:

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Account	Debit	Credit
Cash	$10,000
Accounts Receivable		$10,000

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The bottom line

Accrued revenue is an important concept for beginning investors to learn and understand. Most of the time, it is a normal part of doing business. But when it starts to become a bigger and bigger portion of a company’s revenue, there could be issues.

Pay attention to the difference between cash flow and net income each year and dig deeper if the gap starts to increase. Also be on the lookout for an increase in the allowance for doubtful accounts. If companies aren’t able to collect from customers anymore, they won’t be able to pay their bills.

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About the Author

Mike Price is a 23 year-old Masters of Finance graduate who first started learning about investing on the Motley Fool when he was 13. He is currently seeking a job.

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Mike Price has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.