accrued income
Accrued income is money you have earned and are owed for work or service already delivered, even though the cheque or transfer has not landed yet.
In plain English
Think of the landlord who lets a shop out in Alaba and the tenant pays rent every three months in arrears. By the last week of March, that landlord has already earned one month of rent for January even though the money will not enter the account until April. That earned but unpaid amount is accrued income, and any business that keeps proper books has to recognise it the moment the work is done, not the moment the alert comes in.
This matters because accounting is built on the idea that income belongs to the period it was earned in, not the period it was paid in. A consulting firm in Lagos that finishes a job for a client in December but only gets paid in January must still record that income in December's books. A freelance accountant in London who bills a client monthly but gets paid with a delay works the same way. The invoice may still be sitting in someone's inbox, but the income already belongs to the business that did the work.
Accrued income shows up as an asset on the balance sheet, usually under a line like accrued revenue or receivables, because it represents money the business has a right to collect. It is different from cash in hand, but it is just as real in terms of what the business has actually earned.
For anyone reading financial statements, spotting accrued income helps you understand a business better. A company can look profitable on paper because of accrued income sitting there, even though the actual cash has not arrived. That is why serious investors always check both the income statement and the cash flow statement together, because profit and cash are two different stories that do not always move at the same pace.
A logistics company delivers goods for a client in October and agrees payment terms of thirty days after invoice. The invoice for ₦850,000 is raised on 31 October, but payment only clears on 25 November. In the October accounts, the company records ₦850,000 as accrued income because the delivery, the actual earning event, happened in October.
Questions people ask
Is accrued income the same as a debt owed to the business?
It is close, but the word debt usually refers to a formal loan arrangement. Accrued income simply means the business has already done the work or delivered the goods and is owed payment for it, often recorded as a receivable until the cash comes in.
How is accrued income different from prepaid income?
Accrued income is money you have earned but not yet received, so it sits as an asset waiting to be collected. Prepaid income is the opposite, it is money you have already received for work you have not yet done, so it sits as a liability until you deliver.
Why does accrued income matter for someone reading a company's annual report?
Because it shows how much of the reported profit is real cash already in hand versus income that is earned but still outstanding. A business with a lot of accrued income can look profitable while actually being short of cash, so it is worth checking alongside the cash flow statement.
Last reviewed