What is accrued income?

Accrued income is earnings from investments that have not yet been received by the investing entity, and to which the investing entity is entitled.

The investing entity should accrue its best estimate of the income in the accounting period in which it earns the income.

The accrued income term is sometimes also applied to revenue for which an entity has not yet issued a billing, and for which it has not yet been paid. This is a common occurrence in the services industry, where a project may involve billable services for several months, with an invoice only being issued at the end of the project.

Accrued income is usually listed in the current assets section of the balance sheet in an accrued receivables account.

For example, ABC Company earns $500 of interest during May on an investment in a bond that will only be paid by the bond issuer at the end of the year. In May, ABC records this entry:

	Debit	Credit
Interest receivable	500
Accrued interest income		500

At the end of the year, when the cash payment arrives from the bond issuer, ABC eliminates the entire amount of the interest receivable with a credit, and debits cash for the offsetting amount of cash payment from the issuer.

Related Topics

Revenue Recognition Criteria
What is Accrued Revenue?
What is Unearned Revenue?
What is Unrecorded Revenue?
When Can I Recognize Revenue?