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When a company has earned revenue in the current period but has not yet received cash, this scenario is referred to as accrued revenues. Accrued revenues occur when a business provides goods or services and recognizes the revenue on its income statement, even though payment from the customer has not yet been received. This concept is foundational in accrual accounting, which emphasizes recognizing revenues when they are earned, rather than when cash is received.
Accrued revenues are typically recorded as an asset in the form of accounts receivable, reflecting the amount owed by the customer for the services or products provided. This ensures that the financial statements accurately represent the company's performance within the period.
In contrast, deferred revenues and unearned revenues refer to cash that has been received before the revenue is earned, where the obligations to deliver goods or services are still pending. Prepaid revenues, while a less common term, typically focuses more on expenses rather than revenue recognition. Thus, accrued revenues accurately describes the situation where revenue has been earned, but cash has yet to be collected.