Accrued Income

AAA

DEFINITION of 'Accrued Income'

Income that is earned in a fund or by company by providing a service or selling a product, but has yet to be received. Mutual funds or other pooled assets that accumulate income over a period of time but only pay it out to shareholders once a year are, by definition, accruing their income. Individual companies can also accrue income without actually receiving it, which is the basis of the accrual accounting system.

INVESTOPEDIA EXPLAINS 'Accrued Income'

For example, assume that a company is expected to complete services for another company once per month for six consecutive months, but that under the terms of the contract, it will not receive monetary payment for these services until the end of the six-month period. The company performing the services can accrue a percentage of the income earned after each month, even though physical payment will not take place until after the six-month period.

RELATED TERMS
  1. Cash Accounting

    An accounting method where receipts are recorded during the period ...
  2. Accrue

    The ability for something to accumulate over time. In finance, ...
  3. Accrual Rate

    The rate of interest that is added to the principal of a financial ...
  4. Accruals

    Accounts on a balance sheet that represent liabilities and non-cash-based ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when ...
Related Articles
  1. Investing

    Zooming In On Net Operating Income

    NOI is a long-run profitability measure that smart investors can count on.
  2. Retirement

    3 Ways To Make Your Retirement Funds Last

    These retirement income distribution methods are all viable; the one you choose will depend on your personal circumstances.
  3. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  4. Markets

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  5. Options & Futures

    Live Longer, Retire Younger: Can You Do It?

    Use this vehicle to make sure your payout lasts as long as you do.
  6. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  7. Professionals

    Should Investors Nix Actively Managed Funds?

    Index fund returns are on a tear but does this mean investors should nix actively managed funds?
  8. Mutual Funds & ETFs

    Are These 2015's Most Promising Mutual Funds?

    For 2015, the mutual funds covered below are likely to offer more upside potential than the vast majority of mutual funds in existence.
  9. Mutual Funds & ETFs

    Why These Could Be 2015's 10 Best Mutual Funds

    These 10 mutual funds offer strong potential for 2015. Here's why.
  10. Professionals

    State Street Slashes ETF Fees

    State Street has slashed fees on 41 of its ETFs in the wake of historic redemptions.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center