What Is Accrued Revenue? And Accrued Expenses, Its Mirror

Accrued revenue is income you have earned but not yet invoiced. Accrued expenses are costs you have incurred but not yet been billed for. They are the same idea pointed in opposite directions, and both exist because the calendar and the paperwork do not agree.

Under accrual accounting, a period must carry what it earned and what it consumed — not what happened to be documented in time. When the work is done in March and the invoice goes out in April, March needs the revenue anyway.

Accrued revenue

A consultancy completes 5,000 € of contracted work in March. The contract bills quarterly, so the invoice will not be issued until April. March earned it:

Account	Debit	Credit
2910 Accrued revenue	5,000
5001 Service revenue		5,000

Note the debit: accrued revenue is an asset — a claim you hold that has not yet become a receivable, because no invoice exists. It sits alongside trade receivables but is genuinely different: nobody has been asked to pay yet, so it has no due date and cannot appear in an aging report.

When the invoice is issued in April, the accrual is cleared rather than double-counted:

Account	Debit	Credit
2410 Trade receivables	6,050
2910 Accrued revenue		5,000
4492 VAT payable		1,050

Revenue is not credited again — it was recognized in March. April only converts the accrual into an invoiced receivable and brings the VAT into existence, because VAT follows the invoice, not the accounting accrual. That timing difference is why an accrual is never a substitute for invoicing promptly.

Common cases: work completed between billing dates, milestone contracts where delivery precedes the billing event, interest earned but not yet received, and usage-based fees measured monthly but billed in arrears.

Accrued expenses — the mirror

December's electricity is consumed in December; the utility bills in January. Without an entry, December looks unusually profitable and January unusually expensive:

Account	Debit	Credit
6209 Administrative expenses	400
49 Accrued expenses		400

Accrued expenses are a liability — an obligation you have incurred without holding the invoice. That distinguishes them from accounts payable, which is backed by a supplier document. The difference matters at period end: payables you can count, accruals you must identify.

Typical cases: utilities and telecoms billed in arrears, salaries and bonuses earned but paid next month, interest accrued on loans, audit and legal fees for work already done, and untaken holiday earned by employees.

The reversal discipline

An accrual is an estimate; the eventual document is the fact. The clean mechanic is a reversing entry on the first day of the new period.

Accrue 400 € in December, reverse it on 1 January, then book the actual invoice normally when it arrives:

• If the bill is 412 €, the expense in January is 412 − 400 = 12 € net. December keeps its 400 €, January absorbs the difference.
• If the bill is 380 €, January carries −20 €, a small credit.

No one has to remember to match an invoice against an accrual, and no accrual is silently left on the balance sheet for years. Both the accrual and its reversal stay visible in an append-only ledger, so the audit trail reads as a narrative rather than an edit.

Stale accruals are the classic failure here: an accrued expense nobody reversed, still sitting on the balance sheet three years later because the invoice arrived and was booked separately. Reviewing accrual accounts at each period close is what prevents it.

Accrued vs deferred

The two are constantly confused, and the distinction is simply the direction of time:

	Accrual	Deferral
Revenue	Earned, not yet invoiced → asset	Invoiced/paid, not yet earned → liability
Expense	Incurred, not yet billed → liability	Paid, not yet consumed → asset
Document	Comes later	Came earlier

An accrual runs ahead of the paperwork; a deferral runs behind it. Both are adjusting entries posted at period end, and both exist to put the number in the right period.

How Nordlet handles it

Deferrals on the revenue side are automated: the revenue recognition engine holds invoiced-but-unearned amounts and releases them on schedule, including automatically when a period is locked.

Accruals are not automated, and it is worth being direct about why: an accrual is a judgement about work done or resources consumed that no document in the system yet records. Nothing in the ledger knows that March's consulting hours were delivered until someone says so.

So the workflow is: identify the accruals as part of the period-end checklist, post them with POST /v1/ledger/journal/transactions/create, and post the reversal in the new period. Both are ordinary balanced journal entries with a full audit trail, subject to the same open-period validation as everything else. Time entries and unbilled agreement lines are the usual places to look for what to accrue.

FAQ

What is accrued revenue?

Revenue that has been earned but not yet invoiced — the work is done, the billing event has not happened. It is recorded as an asset and converts to a trade receivable when the invoice is finally issued.

What is the difference between accrued revenue and accounts receivable?

A receivable is backed by an issued invoice with a due date; accrued revenue is not — nobody has been asked to pay yet. Receivables appear in aging and collection reports, accrued revenue does not.

Are accrued expenses the same as accounts payable?

No. Payables are supported by a supplier invoice you have received. Accrued expenses cover costs incurred where the invoice has not arrived, so the amount is your estimate. Both are current liabilities, and both belong in the period the cost was incurred.

Do accruals affect VAT?

No. VAT follows the invoice, not the accounting accrual, so accruing revenue creates no VAT liability and accruing an expense gives no input VAT to reclaim. Both arrive with the document.

Why reverse accruals in the next period?

So the real invoice can be booked normally without anyone having to match it against the estimate. The reversal cancels the accrual, the invoice posts in full, and the difference between estimate and actual falls automatically into the new period.