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Accounting encyclopedia · Bookkeeping

Accrued revenue

Accrued revenue is income a business has earned by delivering goods or services but has not yet billed or received payment for. Under accrual accounting it is recorded in the period it was earned, usually as an asset until the invoice is issued and paid. The CRA says that under the accrual method you report income in the period you earn it, no matter when you receive it.

Sora Accounting & Tax · General information · Editorial policy
Updated · 2 min read

Income is earned before the invoice goes out

Accrued revenue records income in the period the work was done, even when the invoice and the payment arrive in a later period.

Visual labels: Work completed; Year-end cutoff; Invoice sent and paid.

Earned, but not yet invoiced

Accrued revenue sits in the gap between doing the work and sending the bill. Accounts receivable covers invoices already issued. Accrued revenue covers work completed that has no invoice yet, such as a project finished on the last days of the month, hours worked but not yet billed, or interest earned but not yet paid. Deferred revenue is the reverse: cash received before the work is done.

Without an accrual, a period can look weaker than it was, simply because the invoice went out a few days late.

An illustrative example

Suppose a consultant with a December 31 year-end finishes a $5,000 engagement on December 28, and the invoice is sent on January 6. Under the accrual method, the income was earned in December, so the books should show $5,000 of revenue and an asset for the unbilled amount in that year. In January the invoice converts it to a receivable, and payment later clears it. The figures are illustrative only.

Contracts matter. If payment depends on a milestone, approval or delivery that has not happened, whether the income has been earned is a judgment your accountant will make from the agreement.

What the CRA says about timing

The CRA explains that under the accrual method you report income in the fiscal period you earn it, no matter when you receive it, and that you generally have to use the accrual method for business income. Farmers, fishers and self-employed commission agents can use the cash method instead. Under the cash method, you report income in the period you receive it.

Revenue recorded this way can create tax before the money arrives, which is one reason profitable businesses can still run short of cash. Plan for that gap rather than being surprised by it.

What to discuss with your accountant

Bring a list of work completed near year-end, signed contracts or statements of work, timesheets, and invoices dated after year-end that relate to earlier work. Ask how to treat partly finished jobs, long-term contracts and amounts that depend on approval.

The usual mistakes are leaving out unbilled work entirely, booking it twice when the invoice is issued, and counting amounts that were not yet earned. A short month-end review of unbilled work keeps these from piling up.

Sources & editorial notes

Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.

Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.