What is Accrued Revenue?
Accrued revenue refers to the income that's been earned, but not yet received. In the construction industry, this could apply to a situation where work has been completed, or is in progress, but payment is due at a later date. This typically happens due to the nature of the construction contracts, where payments are often milestone-based or upon the completion of the project. For example, if a construction company has finished building a house but hasn't yet been paid, the amount due for that project would be considered their accrued revenue. It fundamentally reveals the financial reality of a business. Accrued revenue is vital as it gives an accurate picture of the company's earnings and financial strength, aiding in strategic decision-making for the business. It is recognized as an asset on the balance sheet until payment is received.