ACCRUED INCOME Meaning and
Definition
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Accrued income refers to revenue that has been earned but has not yet been received by the recipient. It represents the amount of money that a business or individual is owed for providing goods or services but has not yet been paid. This income is recognized as an asset on the balance sheet because it is considered to be a claim against the debtor.
Accrued income can come from various sources, such as interest on investments, royalties, rent, or fees for services rendered. Regardless of the source, accrued income is only recorded if it has been earned, meaning that the goods or services have been provided and the recipient has an obligation to pay.
This type of income is often recorded through the use of accrual accounting, which recognizes revenue when it is earned rather than when it is received. By recognizing accrued income, businesses can provide a more accurate representation of their financial position, even if the cash has not yet been received.
Accrued income is typically recorded as income in the profit and loss statement and as a current asset on the balance sheet. It is later adjusted to cash when the payment is received. This recognition of accrued income allows for better financial reporting and helps to match revenues with the expenses incurred to generate those revenues
Etymology of ACCRUED INCOME
The word "accrued" is derived from the Latin word "accrūscere", which means "to grow or increase". It is a combination of the prefix "ad-" meaning "to" and the verb "crēscere" meaning "to grow". The term "income" comes from the Middle English word "incomen", which means "to come in" or "to enter". Thus, "accrued income" refers to income that has accumulated or grown over time and is yet to be received.
