Accrued income vs deferred income

In cash basis of accounting, you’ll not see the terms accrued income or deferred income. You simply record sales income when the customer pays for the goods or services. However, as per accrual basis of accounting, revenues and incomes are recorded when earned regardless of whether cash is received or not. So, receiving cash is not the decisive factor for the timing of income recognition.

Accrued income represents income that has been earned but not yet billed or received. Further explanation and examples are given in the post “Accrued income”.

Deferred income or deferred revenue represents advance payments received by an entity from its customer for the provision of a good or service to the customer in future. Further explanation and an example are given in the post “Deferred income”.

Following is a comparison of accrued income and deferred income to better understand these concepts.