Distinguish between accrued revenue and unearned revenue: which statement is true?

• A. Accrued revenue is revenue earned but not yet billed or collected; unearned revenue is cash received before goods/services are delivered.
• B. Accrued revenue is cash received in advance.
• C. Unearned revenue is revenue earned but not billed.
• D. Accrued revenue and unearned revenue are the same.

Answer: (A)

The idea here is recognizing revenue based on when it’s earned, not when cash changes hands. Accrued revenue happens when you’ve actually earned the revenue by delivering the goods or performing the service, but you haven’t billed the customer yet or haven’t collected the cash. In accounting terms, you record revenue and an asset representing the amount you expect to receive (a receivable). Unearned revenue is the opposite: cash is received before you’ve delivered the goods or performed the service, so you record a liability (unearned revenue) because you still owe the customer either the service or the product. When you later fulfill the obligation, you move the amount from unearned revenue to actual revenue.

So, the true statement is that accrued revenue is revenue earned but not yet billed or collected, while unearned revenue is cash received before delivery. The other descriptions mix up the timing of revenue recognition and cash receipts.