What is the effect on assets and income when revenue is accrued?

When revenue is accrued, it means that revenue has been earned but not yet received in cash. Under the accrual basis of accounting, revenue is recognized when it is earned, regardless of when cash is collected. This leads to an increase in both assets and income.

When the revenue is accrued, it is typically recorded as an increase in accounts receivable, which is an asset. At the same time, the revenue recognized increases the income on the income statement for that period. Consequently, both the accounts receivable (an asset) and revenue (which contributes to income) rise. This reflects the economic reality of the business activities, ensuring that financial statements present an accurate picture of the organization's financial performance and position.

In summary, when revenue is accrued, it positively impacts both the assets (increasing them through accounts receivable) and income, capturing the revenue earned even before it is received in cash.