Enter the revenue amount in your selected currency.
History:

Explanation

What is Accrued Revenue?

Accrued revenue refers to income that has been earned but not yet received. This typically occurs when a service has been provided or a product has been delivered, but payment has not yet been collected. Accrued revenue is recorded in the financial statements to reflect the income that is expected to be received in the future.

What is Earned Revenue?

Earned revenue, on the other hand, is the income that a business has actually earned through its operations. This means that the service has been provided or the product has been delivered, and the revenue is recognized in the financial statements. Earned revenue is crucial for assessing a company’s performance over a specific period.

How to Use the Accrued Revenue vs Earned Revenue Calculator?

The calculator allows you to input the following parameters:

  1. Revenue Amount: The total revenue expected from the service or product.
  2. Revenue Recognition Date: The date when the revenue is recognized.
  3. Cash Received Date: The date when the cash is actually received.
  4. Accrual Period: The period (in days) over which the revenue is accrued.
  5. Percentage of Work Completed: The percentage of the work that has been completed at the time of calculation.

Using these inputs, the calculator will provide you with:

  • Earned Revenue: The revenue that has been recognized based on the work completed.
  • Accrued Revenue: The revenue that is expected to be received based on the accrual period.

Formulas Used in the Calculator

Earned Revenue Calculation:

The formula to calculate earned revenue is:

§§ \text{Earned Revenue} = \text{Revenue Amount} \times \left( \frac{\text{Percentage of Work Completed}}{100} \right) §§

where:

  • § \text{Earned Revenue} § — the revenue that has been recognized.
  • § \text{Revenue Amount} § — the total revenue expected.
  • § \text{Percentage of Work Completed} § — the percentage of the work that has been completed.

Accrued Revenue Calculation:

The formula to calculate accrued revenue is:

§§ \text{Accrued Revenue} = \text{Earned Revenue} \times \left( \frac{\text{Accrual Period}}{30} \right) §§

where:

  • § \text{Accrued Revenue} § — the revenue that is expected to be received.
  • § \text{Earned Revenue} § — the revenue that has been recognized.
  • § \text{Accrual Period} § — the period (in days) over which the revenue is accrued.

Practical Examples

  • Service Industry: A consulting firm completes a project worth $10,000, and the client is billed but has not yet paid. If 50% of the work is completed, the earned revenue would be $5,000, and if the accrual period is 30 days, the accrued revenue would also be $5,000.

  • Construction Projects: A construction company may recognize revenue as work is completed. If a project is valued at $100,000 and 70% of the work is done, the earned revenue would be $70,000. If the accrual period is 60 days, the accrued revenue would be calculated based on the earned revenue.

When to Use the Accrued Revenue vs Earned Revenue Calculator?

  1. Financial Reporting: To accurately report income in financial statements.
  2. Cash Flow Management: To understand when to expect cash inflows based on accrued revenue.
  3. Project Management: To track the financial progress of ongoing projects.
  4. Budgeting and Forecasting: To make informed decisions based on expected revenue.

Definitions of Key Terms

  • Accrued Revenue: Income that has been earned but not yet received.
  • Earned Revenue: Income that has been recognized based on the completion of work or delivery of goods.
  • Revenue Recognition: The accounting principle that determines when revenue is recognized in the financial statements.
  • Accrual Period: The time frame over which revenue is accrued.

Use the calculator above to input your values and see the results dynamically. This will help you make informed decisions based on your financial data.