Which of the following correctly distinguishes accrued revenue from unbilled revenue?

• A. Accrued revenue is earned but not yet billed; unbilled revenue is revenue earned but not yet invoiced; both may be recorded as receivables.
• B. Accrued revenue is revenue earned but not yet invoiced; unbilled revenue is revenue earned and invoiced.
• C. Accrued revenue is revenue earned and invoiced; unbilled revenue is cash collected in advance.
• D. Accrued revenue is cash received; unbilled revenue is revenue recognized when cash is received.

Answer: (A)

Under accrual accounting, revenue is recognized when it is earned, not when cash is received or when a bill goes out. When work is performed (or goods delivered) but the invoice hasn’t been issued yet, the revenue has been earned but the billing hasn’t occurred. This creates an accrued revenue, also described as unbilled revenue, which sits as a receivable on the balance sheet awaiting invoicing and eventual payment. The key idea is that the billing status—whether the revenue has been billed or invoiced—distinguishes accruals from other timing issues, not a difference in whether revenue has actually been earned.

The other statements misstate the timing or the nature of the receivables: revenue that is earned and invoiced has already been billed, not unbilled; cash collected in advance is a liability (deferred revenue) until the service is performed; and revenue recognized upon cash receipt reflects cash basis timing, not accrual timing. So saying accrued revenue is earned but not yet billed and unbilled revenue is revenue earned but not yet invoiced—and that both may be recorded as receivables—best captures the concept.