How to Handle Accrued Income?



  • Rebecca Ralls

    Hi Richard,

    Payment and revenue recognition are related, but fully separate processes.  As long as you are operating using accrual accounting, one does not depend on the other.  If an invoice credits deferred revenue, the revenue may be recognized at any time - independent of whether that invoice has been paid. 

    I am not accountant so my comments should be verified with yours, but here is how you could manage these questions:

    for item 1: It seems strange to me to have earned revenue that you have not billed for yet.  Can you say more about this use case?  What are the reasons for delaying billing?  To manage this use case (whatever your reasons) to recognize revenue, you can create a journal entry that credits revenue and debits unearned revenue, as long as - once you create the invoice - you make sure it credits the same deferred revenue GL Account as the journal entry.  

    For item 2 - This is just an open Accounts receivable record.  The Billing can credit revenue or credit deferred revenue, which can be recognized using a JE or a AE as best fits your process, but whether the revenue is recognized for an invoice or not, the balance of the invoice will reside in your AR GL Account until it is paid.  .  

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  • Eric LaBrant

    In our case, we built a 2 reports, each showing all orders with status of Completed.

    The first we filter for all orders where the Billing Lines total is "" (null) or $0. These orders are Completed, but not billed, so we accrue the Quote total.

    The second report we filter by date, where the Billing Date is after the end of the accounting period in question. These orders were completed by the close of the period, but not billed at that time. We again accrue the quote total.

    We attach the reports to a single reversing JE as backup. DR Accrued Revenue, CR Revenue. Then Reverse Clone with Lines for the first day of the subsequent period.

    For matching, make sure to accrue your expenses as well.

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