Accrued revenues and accounts receivable are basically the assets of the company. However, certain things make them different.
Generally, accounts receivable are the outstanding invoices that the company issued to the customers, and the customers still not making payments to those invoices.
It is a difference between accrued revenues. Accrued revenues refer to the amount that the company had offered the goods or services to customers and the invoices still not recreate and the bill to the customers.
For example, the company sells five transactions to its customers. In all of those five transactions, the goods are already delivered to customers. There are only three transactions that invoices have been issued to customers at the month-end, and the remaining two are still not issued yet.
In this case, the three transactions that the accountant had issued invoices to the customers need to record these transactions as to accounts receivable.
For example, if these three invoices amounted to USD3K, then the accounting records would be Debit account receivable USD 3K and then Credit Saled Revenues USD3K. This is to ensure that by the end of the month, sales revenue completely records.
The accountant still needs to recognize those two transactions as revenue for the other two transactions that the accountant has not issued invoices. This is to comply with IAS 18.
In this case, assuming the amount of these two transactions are USD2K. The accountant needs to recognize USD2K as revenues in the income statement and then accrued revenue in the balance sheet under current asset categories. The entry would be debit accrued revenues and credit sales revenues.
In the following month, the account will need to issue these two invoices to customers. And, once the invoices are issued, accountants need to move these two transactions that record as accrued revenues into accounts receivable.
Is accrued revenue receivable or payable?
In some case, the company already supply goods or render the services to its customer but, base on the payable term or negotiation with it customer, the company could not bill. Sometimes, due to the late internal process of the company, that could lead to late issue invoice to customers. These are the main reasons causes the company records those unbilled sales transactions as accrued revenues rather than accounts receivable.
Let see the entries below,
Dr. Sales revenue $2K
Cr Accrued revenue $2K
As you can see, we still need to recognize $2K as sales revenues even though we are not billed to the customer yet. And Accrued revenues here are part of the receivable account, and it is not payable.
How do we recognize accrued revenue?
Before we are discussing the recognition of accrued revenues, let us discuss the recognition of the revenue. When the company sells goods or services to its customer and the control of those goods or services is transferred from the company to customers. At this time, the company could recognize the number of sales of those goods or services to its customer.
At this time, the company could record those amounts as sales revenues in the income statement or just accrued those revenues, which is the same class of account as revenue. The main difference between revenues and accrued revenues is billing or unbilled only.
Accrued Revenues refer to the amounts that customers owe the company based on the services or goods that the company provided them while the invoices are still not billed.
However, accounts receivable are the outstanding invoices that customers still have not paid. Both accrued revenues and accounts receivable are the current assets of the company.