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Accrued revenues, according to AccountingCoach (2015), “are fees and interest that have been earned and sales that occurred, but they have not yet been recorded through the normal invoicing paperwork.” When accrued revenues occur and need to be recorded, they require an adjusted entry. The adjusted entry for the accrued revenue is required so that the revenue is recorded in the time period it was earned in accordance with the revenue recognition principle. If the adjusted entry did not occur for the revenue it would cause the revenue for the time period it was earned to be understated and the revenue for the time period it was received to be overstated.
An example of accrued revenue would be a doctor waiting for payment from an insurance company. In this example, the doctor provided a patient with health care service on December 28th that totaled $300. The doctor then billed the patient’s insurance on December 28th but did not receive payment for the services provided until January 10th. Since the doctor’s financial year ended on December 31st, the doctor must record the revenue on December 28th so that the revenue is recognized in the period that it was earned.
AccountingCoach. (2015). What are accrued revenues and when are they recorded?. Retrieved
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Generally Accepted Accounting Principles, Accrual, Revenue recognition, Revenue, Adjusting entries, Matching principle
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