Difference Between Accrued Revenue / Income And Income Received In Advance / Unearned Revenue

Difference Between Earned Revenue And Unearned Revenue In Accounting

1. Accrued Income is earned by the business by providing services to the client but still not payment is received from client. Examples are Accrued Investments, Accrued Fees, etc., while Income Received in Advance is not earned by the business but the payment is received by the company and the business has to render the services to its clients. Examples are Advance Rent Received, Commission Received In Advance, Advance Fees Received etc.

2. Accrued Income is a Current Asset and it is recorded on Assets Side of Balance Sheet while Income Received in Advance or Unearned Revenue is a Current Liability and shown on Liabilities & Equity Side of Balance Sheet.

3. Accounting Journal Entry for Accrued Income is to debit the Accrued Income and credit the Income / Revenue Received. At the time of adjusting entry passed at the end of accounting period or When the portion of it is actually received by the company, then we Reverse The Entry with the monetary value received.

                                               Accrued Income a/c    XXX

                                                                              Revenue Received a/c     XXX

(Accrued Income Recorded For the Period)

While in case of Unearned Income, Cash is debited while Unearned Income / Revenue is credited as shown below:

                                                       Cash a/c     XXX

 

                                                                   Unearned Revenue    XXX

(Revenue Received Not Actually Earned)

When the company actually earns the revenue then the portion of revenue is transferred to concerned revenue account by credited it and debited Unearned Revenue as shown below:

                                           Unearned Revenue a/c     XXX

                                                                              Revenue Received    XXX

(Portion of Revenue Now actually earned)

So, we can say that, Accrued Income And Unearned Income are two different Accounts i.e., One is Current Asset while other is Current Liability and these are closed by passing reversing entries when these are actually received or earned by the business.