Accrued Income in IT Act - Definition, Example and Benefits

What is Accrued Income?

Accrued income is the income that is generated by the regular activities of a person or a business, but has not yet been billed or collected. Accrued income in the balance sheet is presented as an asset, following the accrual accounting method. In a way, we can say that accrued income is current asset.

It also aligns the expenses and revenues with the time when they actually happened. Some of the instances of accrued income are rental income from tenants, interest income from investments, or income from services that have not yet been invoiced or completed.

Accrued Income Example

There can be many sources from which the accrued income can arise. Here are a few of the examples:

• It includes the goods that are delivered to a buyer who has not been paid or billed.
• It includes services performed for a customer who has not been paid or invoiced.
• It includes the rent that has not yet been collected from the tenant on a property.
• It includes those bonds or interest earned on a loan that the issuer or the borrower has not paid.

Benefits of Accrued Income

The following are the benefits or advantages of the accrued income:

• Cash Flow management: It anticipates the future flow of cash, which improves the flow management of the cash in a business.
• Enhance worth: It helps a business in showing its ability to generate income from its operations and assets, which also enhances its creditworthiness.
• Economic Growth: It matches the expenses with the revenue incurred in the same duration, which helps in knowing the true insights into the economic growth of a business.