What is a common characteristic of accrued revenue?

Accrued revenue is recognized before the cash is collected, which is a fundamental characteristic distinguishing it from other types of revenue recognition. This concept aligns with the revenue recognition principle, which states that revenue should be recorded when it is earned, regardless of when the payment is received.

In practical terms, this means that when a company provides goods or services to a customer, it may record the revenue at the time of delivery or completion of the service, even if the customer has not yet made the payment. This entry reflects the entity’s right to receive payment, thus providing an accurate picture of the company’s financial performance during the accounting period.

The other choices do not align with the characteristics of accrued revenue. Cash received is not a criterion for accrual, as accrued revenue specifically relates to transactions where payment has not yet been made. Additionally, accrued revenue does not decrease total liabilities; rather, it affects assets, as it typically increases accounts receivable. Lastly, accrued revenue is recognized as an asset rather than a liability, because it represents amounts owed to the company for services rendered or goods delivered but not yet paid for.