Accrued Income Meaning

Accrued income is income that has been earned in a given accounting period but has not yet been received in cash. It arises under the accrual method of accounting, which requires that income be recognized when it is earned, not when payment is collected.

Common examples include interest on deposits or bonds that has accrued between coupon dates, or services that have been provided to a client but will be invoiced and paid in a future period. In these cases, the company records a debit to an accrued income (or receivable) account and a credit to the relevant income account.

This ensures the income statement reflects the revenue in the correct period. When the payment is eventually received, the accrued income balance is reduced and the cash or bank account is increased.

Accrued income is generally classified as a current asset on the balance sheet, assuming settlement is expected within the next year. Accrued income is sometimes confused with accrued revenue, but the terms can be used with slightly different emphasis.

Accrued income is often associated with returns from financial or investing activities, while accrued revenue can refer more broadly to sales of goods or services on credit. In both cases, the underlying principle is the same: income is recognized when earned, not when cash is received.