What is Accrued Revenue?
Accrued revenue is income that has been earned through the delivery of goods or services but has not yet been invoiced or collected by the end of the reporting period. Under accrual accounting and IFRS 15, it is recognised as revenue and a corresponding contract asset or receivable on the balance sheet.
How It Works
- Identify performance obligations satisfied during the period that have not yet been billed.
- Estimate the transaction price attributable to the work completed.
- Debit accrued revenue (asset) and credit revenue in the income statement.
- Reverse and re-bill once the invoice is raised in the next period to avoid double counting.
Saudi Context
Saudi consulting, IT, and construction firms recognise accrued revenue under IFRS 15 when work is delivered ahead of billing milestones. Once invoiced, the entry transfers to trade receivables. ZATCA accepts the IFRS 15 treatment for VAT and zakat purposes, with VAT typically becoming due on invoice date.
Example
A Riyadh consultancy completes a SAR 300,000 phase of a SAR 1 million project in December but issues the invoice in January. It accrues SAR 300,000 revenue in December and reclassifies it to receivables when the invoice is raised.