{"id":25256,"date":"2025-11-25T12:36:45","date_gmt":"2025-11-25T12:36:45","guid":{"rendered":"https:\/\/www.mooninvoice.com\/blog\/?p=25256"},"modified":"2026-04-10T07:48:11","modified_gmt":"2026-04-10T07:48:11","slug":"accrued-vs-deferred-revenue","status":"publish","type":"post","link":"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/","title":{"rendered":"Accrued vs. Deferred Revenue: What&#8217;s the Difference?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_11 counter-hierarchy counter-decimal ez-toc-grey\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\"><i class=\"ez-toc-glyphicon ez-toc-icon-toggle\"><\/i><\/a><\/span><\/div>\n<nav><ul class=\"ez-toc-list ez-toc-list-level-1\"><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#What_is_Accrued_Revenue\" title=\"What is Accrued Revenue?\">What is Accrued Revenue?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Accrued_Revenue_Example\" title=\"Accrued Revenue Example\">Accrued Revenue Example<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#What_is_Deferred_Revenue\" title=\"What is Deferred Revenue?\">What is Deferred Revenue?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Deferred_Revenue_Example\" title=\"Deferred Revenue Example\">Deferred Revenue Example<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Key_Differences_Between_Accrued_and_Deferred_Revenue_Accrued_vs_Deferred_Revenue\" title=\"Key Differences Between Accrued and Deferred Revenue: Accrued vs. Deferred Revenue\">Key Differences Between Accrued and Deferred Revenue: Accrued vs. Deferred Revenue<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Accrued_Expense_vs_Deferred_Expense\" title=\"Accrued Expense vs. Deferred Expense\">Accrued Expense vs. Deferred Expense<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Impact_of_Deferred_Accrued_Revenue_on_the_Financial_Statements\" title=\"Impact of Deferred &amp; Accrued Revenue on the Financial Statements\">Impact of Deferred &amp; Accrued Revenue on the Financial Statements<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Accounting_Methods_in_Recognising_Revenue_Accrual_vs_Cash_Accounting\" title=\"Accounting Methods in Recognising Revenue: Accrual vs. Cash Accounting\">Accounting Methods in Recognising Revenue: Accrual vs. Cash Accounting<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Best_Practices_to_Follow_for_Managing_the_Revenue\" title=\"Best Practices to Follow for Managing the Revenue\">Best Practices to Follow for Managing the Revenue<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#How_to_Manage_Accrued_and_Deferred_Revenue_Using_Moon_Invoice\" title=\"How to Manage Accrued and Deferred Revenue Using Moon Invoice?\">How to Manage Accrued and Deferred Revenue Using Moon Invoice?<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#Wrapping_Up\" title=\"Wrapping Up\">Wrapping Up<\/a><\/li><li class=\"ez-toc-page-1 ez-toc-heading-level-2\"><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/#FAQs\" title=\"FAQs\">FAQs<\/a><\/li><\/ul><\/nav><\/div>\n<p><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\/\",\n  \"@type\": \"Article\",\n  \"mainEntityOfPage\": {\n    \"@type\": \"WebPage\",\n    \"@id\": \"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/\"\n  },\n  \"headline\": \"Accrued vs. Deferred Revenue: What's the Difference?\",\n  \"description\": \"Learn the key differences between accrued and deferred revenue, including examples and best practices for reporting each.\",\n  \"image\": {\n    \"@type\": \"ImageObject\",\n    \"url\": \"https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2025\/11\/25112721\/Accrued-vs-deferred-revenue-feature-image-changes.jpeg\",\n    \"width\": \"1200\",\n    \"height\": \"700\"\n  },\n  \"author\": {\n    \"@type\": \"Organization\",\n    \"name\": \"Moon Invoice Team\"\n  },\n  \"publisher\": {\n    \"@type\": \"Organization\",\n    \"name\": \"Moon Invoice\",\n    \"logo\": {\n      \"@type\": \"ImageObject\",\n      \"url\": \"https:\/\/cdn.mooninvoice.com\/image\/images\/home_images\/mi-animated-logo.svg\",\n      \"width\": \"254\",\n      \"height\": \"47\"\n    }\n  },\n  \"datePublished\": \"2025-11-25\",\n  \"dateModified\": \"2025-11-25\"\n}\n<\/script><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What is the difference between deferred revenue and ARR?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"Deferred revenue refers to the upfront payment the business receives for services or products that have not yet been delivered. It is recorded as a liability on the balance sheet. ARR (Annual Recurring Revenue) represents the recurring revenue a business receives every year from subscriptions or long-term contracts.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Is deferred revenue a DR or a CR?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"Deferred revenue is recorded as a credit (CR) because the company has received money for goods or services that have not yet been delivered. It is classified as a liability.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What are the three accrued revenues?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The three accrued revenues are: 1) Interest Revenue \u2013 income earned on loans, savings accounts, or investments that has not yet been received; 2) Service Revenue \u2013 income generated from delivered services for which payment has not yet been received; 3) Rental Revenue \u2013 income earned from renting property where the payment is pending.\"\n      }\n    },\n    {\n      \"@type\": \"Question\",\n      \"name\": \"Is accrued revenue DR or CR?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"Accrued revenue is recorded as a debit (DR) because it represents income earned but not yet billed or received. It increases assets on the balance sheet. The revenue is recognized once the bill is generated and payment is received.\"\n      }\n    }\n  ]\n}\n<\/script><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Accrued_Revenue\"><\/span>What is Accrued Revenue?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Accrued revenue refers to the earnings or income for which the company has not received payment, even after successfully delivering the product or service. This kind of revenue also refers to unrealized payments under which the company has not received any cash.<\/p>\n<p>Such revenues are recorded as an asset or accounts receivable on the balance sheet once the company receives payment.<\/p>\n<p>A financial professional can get a clear scenario of the company\u2019s financial performance when they perform timely recognition. Whether the payment is received or not, recognizing the revenue is crucial.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Accrued_Revenue_Example\"><\/span>Accrued Revenue Example<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Let\u2019s understand accrued revenue through an example. Suppose an IT company, Moon Technolabs Pvt Ltd, provides the client with a web development service worth $5,000 in November. However, the client will pay the amount in December upon receipt of the invoice.<\/p>\n<p>This $5,000 will be referred to as accrued revenue. This is because earnings and revenue have been recorded, but the payment is still pending.<\/p>\n<p>The company will record it as a current asset in the balance sheet until the invoice is shared and the payment is received. Upon receipt of the payment, the company will record cash received in the balance sheet.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Deferred_Revenue\"><\/span>What is Deferred Revenue?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Deferred revenue, also called unearned revenue, is revenue the company receives before delivering a service or product. It reflects future obligations because it includes an upfront payment or cash received in advance. This type of revenue is recorded as a liability on the balance sheet.<\/p>\n<p>It is the reverse of accrued revenue. So when you think over what is opposite to deferred revenue, it&#8217;s accrued.<\/p>\n<p>It should be noted that <a href=\"https:\/\/www.mooninvoice.com\/blog\/what-is-deferred-revenue\/\">deferred revenue<\/a> gradually decreases when the company delivers the service or the product. It is because the same amount becomes the actual revenue. Deferred revenue is debited, and actual revenue is credited.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Deferred_Revenue_Example\"><\/span>Deferred Revenue Example<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Again, taking the above example of Moon Technolabs Pvt Ltd, we understand the deferred revenue. Suppose the company receives $1,000 from the client before delivering the app development service. The company received money in November but provided the service in December.<\/p>\n<p>The $1,000 amount is recorded as a liability. Once the company delivers the project, it will become actual revenue and be recorded as a credit, while deferred revenue decreases.<\/p>\n<div class=\"cta-sc\">\n<p class=\"cta-ttl\"><strong class=\"cta-ttl\">Invoicing Is Now Simple With Moon Invoice<\/strong><\/p>\n<p class=\"cta-cnt\">66+ customized templates, automation concept, and a complete invoicing solution for your business. Open the door &amp; level up your invoicing!<\/p>\n<p><a class=\"btn\">Free Trial Start Here<\/a>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"Key_Differences_Between_Accrued_and_Deferred_Revenue_Accrued_vs_Deferred_Revenue\"><\/span>Key Differences Between Accrued and Deferred Revenue: Accrued vs. Deferred Revenue<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img decoding=\"async\" loading=\"lazy\" class=\"alignnone size-full wp-image-25266\" src=\"https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2025\/11\/25121713\/accrued-vs-deferred-revenue-inner-image.jpeg\" alt=\"accrued vs deferred revenue difference\" width=\"1200\" height=\"700\" srcset=\"https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2025\/11\/25121713\/accrued-vs-deferred-revenue-inner-image.jpeg 1200w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2025\/11\/25121713\/accrued-vs-deferred-revenue-inner-image-300x175.jpeg 300w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2025\/11\/25121713\/accrued-vs-deferred-revenue-inner-image-1024x597.jpeg 1024w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2025\/11\/25121713\/accrued-vs-deferred-revenue-inner-image-768x448.jpeg 768w, https:\/\/mi-blogs.s3.amazonaws.com\/mi-live\/blog\/wp-content\/uploads\/2025\/11\/25121713\/accrued-vs-deferred-revenue-inner-image-150x88.jpeg 150w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<p>Accrued and deferred revenue differ in many respects, and understanding the differences is essential to <a href=\"https:\/\/www.mooninvoice.com\/blog\/how-to-calculate-revenue\/\">calculating revenue<\/a>. Here is a tabular presentation of accrued revenue vs. deferred revenue.<\/p>\n<div style=\"height: 10px;\"><\/div>\n<table class=\"table-block\">\n<thead>\n<tr>\n<th><b>Comparing Features<\/b><\/th>\n<th><b>Accrued Revenue<\/b><\/th>\n<th><b>Deferred Revenue<\/b><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Definition<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Accrued revenue is an income that a business earns by selling products or services but has not been billed for or received payment for.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Deferred revenue is money the company receives before delivering a service or selling a product to a client.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Also called<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Unbilled revenue<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Unearned revenue<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Timing of payment<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Revenue is earned first, and payment comes later.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Payment is received first, and revenue is earned later.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Time of occurrence<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Occurs when the service or product is delivered first.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Occurs when the payment is received first.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Balance sheet record<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Recorded as an asset in the balance sheet.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Recorded as liabilities in the balance sheet.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Revenue recognition<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Recognized when the work is performed, not when the payment is received.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Recognized when the product or service is delivered, even if payment is received in advance.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Payment status<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Payment pending<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Payment already received<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Accounting basis<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Accrual accounting<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Accrual accounting<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Impact of cash flow<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">No cash received<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Cash received<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Examples<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">A company provides consulting services for which the invoice has not been shared with the client.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">A company charges an advance payment for annual subscriptions.<\/span><\/center><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2><span class=\"ez-toc-section\" id=\"Accrued_Expense_vs_Deferred_Expense\"><\/span>Accrued Expense vs. Deferred Expense<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>With defining accrued revenue vs. deferred revenue, we now define the differences between accrued expense and deferred revenue:<\/p>\n<div style=\"height: 10px;\"><\/div>\n<table class=\"table-block\">\n<thead>\n<tr>\n<th><b>Comparing Features<\/b><\/th>\n<th><b>Accrued Expense<\/b><\/th>\n<th><b>Deferred Expense<\/b><\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Meaning<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">An accrued expense is an expense a business has incurred but for which payment is still pending.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Deferred expense refers to an expense that has not been incurred, even though the payment has been made.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Cash timing<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Cash payment is made later on.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Cash payment comes in advance form.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Recorded<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">This expense is recorded when the service\/value is received.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">This expense is incurred when cash is paid for the future benefits.<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Payment status<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Not paid yet<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">Paid<\/span><\/center><\/td>\n<\/tr>\n<tr>\n<td><center><span style=\"font-weight: 400;\">Effect on Financial Statement<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">It increases the current liabilities.<\/span><\/center><\/td>\n<td><center><span style=\"font-weight: 400;\">It increases the current assets.<\/span><\/center><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<div class=\"blog-cta-main blog-cta-tip\">\n<strong><span class=\"cta-icon\">\ud83d\udca1<\/span>Pro Tip:<\/strong><\/p>\n<p>Always pair and match revenue with its corresponding expense. Accrued revenue is matched with <a href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-expenses\/\">accrued expenses<\/a>, and deferred revenue is matched with prepaid expenses.<\/p>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"Impact_of_Deferred_Accrued_Revenue_on_the_Financial_Statements\"><\/span>Impact of Deferred &amp; Accrued Revenue on the Financial Statements<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>With a deep understanding of the accrued revenue vs. deferred revenue, it is also important to understand how these terms influence the financial statements.<\/p>\n<p>Any company&#8217;s balance sheet and financial reports include deferred and accrued revenue. Both affect the financial statements differently. Let&#8217;s see their impact here:<\/p>\n<p>In the deferred revenue, cash is received first, and services and products are delivered later. It is recorded as a liability, not as an expense.<\/p>\n<ul class=\"custom-disc-list\">\n<li>In the balance sheet, there is no immediate effect on the equity until the revenue is earned. Once the revenue is received, liabilities increase, and cash also increases.<\/li>\n<li>In the income statement, deferred revenue is moved from the liabilities section to the revenue section. This is set to boost net income.<\/li>\n<li>In the cash flow statement, the received cash is recorded under operating activities. Therefore, there is a short-term boost to operational cash flows.<\/li>\n<\/ul>\n<p>In the <a href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-revenue\/\">accrued revenue<\/a>, the service or product is delivered before the payment. This revenue is earned but not yet collected or billed.<\/p>\n<ul class=\"custom-disc-list\">\n<li>In the balance sheet, professionals record accrued revenue as a current asset, under Accounts Receivable or Accrued Revenue.<\/li>\n<li>In the income statement, the revenue increases immediately &#038; net income increases.<\/li>\n<li>In the cash flow statement, cash flow is reported under operating activities. The cash part increases once the customer makes payments.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Accounting_Methods_in_Recognising_Revenue_Accrual_vs_Cash_Accounting\"><\/span>Accounting Methods in Recognising Revenue: Accrual vs. Cash Accounting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>There are two accounting methods for recognizing revenue which are <a href=\"https:\/\/www.mooninvoice.com\/blog\/cash-vs-accrual-accounting\/\">accrual and cash accounting<\/a>:<\/p>\n<h3>1. Accrual Accounting<\/h3>\n<p>In an accrual accounting method, revenue is recorded when earned and expenses are recorded when incurred. It is regardless of the cash payment. It also follows the matching principle, which requires revenues to be matched with related expenses. Accrual accounting is ideal for larger businesses.<\/p>\n<h3>2. Cash Accounting<\/h3>\n<p>This cash basis accounting method only recognizes revenue &amp; expenses when cash is exchanged. This kind of method is suitable for smaller businesses that prefer cash transactions. In this method, expenses are not recorded when they are incurred; instead, they are recorded when paid.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Best_Practices_to_Follow_for_Managing_the_Revenue\"><\/span>Best Practices to Follow for Managing the Revenue<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Having the right knowledge of deferred vs. accrued revenue is crucial to recognizing revenue correctly. In addition, the following practices are important for managing revenue, helping maintain cash flow, and ensuring accurate financial reporting.<\/p>\n<h3>Defining Revenue Recognition Policies<\/h3>\n<p>Preparing and establishing proper revenue recognition policies is an important practice. These policies outline how &amp; when to recognize revenue. Setting up policies helps minimize potential audit issues. However, experts must ensure that policies align with relevant accounting standards, such as ASC 606 and <a href=\"https:\/\/www.ifrs.org\/issued-standards\/list-of-standards\/ifrs-15-revenue-from-contracts-with-customers\/\" target=\"_blank\" rel=\"nofollow noopener\">IFRS 15<\/a>.<\/p>\n<h3>Reconciliation and Review<\/h3>\n<p>Reviewing recognition at regular intervals helps ensure the accuracy of financial data. One of the most effective ways is to compare recorded revenue with payment gateway records and bank statements. The process could be monthly or quarterly, as per the volume and complexity of the transaction.<\/p>\n<h3>Choosing the Best Accounting System<\/h3>\n<p>Utilizing an accounting system streamlines the process and helps manage revenue efficiently. However, you must ensure that the system offering advanced features aligns with your business&#8217;s complexity. Seamless integration, automation, AI-powered, and real-time analysis are key elements to look for when choosing a system. One can reduce manual work and improve many aspects, including the revenue schedule, through automation.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_Manage_Accrued_and_Deferred_Revenue_Using_Moon_Invoice\"><\/span>How to Manage Accrued and Deferred Revenue Using Moon Invoice?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Moon Invoice is the <a href=\"https:\/\/www.mooninvoice.com\/online-invoicing-software\">best online invoicing software<\/a>, offering a one-to-one accounting solution. It helps businesses manage their revenue efficiently through digital invoicing, recurring billing, and real-time business &amp; financial reports.<\/p>\n<h3>Managing Accrued Revenue<\/h3>\n<p>As with accrued revenue, services are delivered to the client, but the bill is still pending. Professionals can handle such revenues by creating &amp; drafting a digital invoice. Once the invoice is generated, record it as revenue in your system. Once the customer makes the payment, record it.<\/p>\n<h3>Managing Deferred Revenue<\/h3>\n<p>Because deferred revenue includes an upfront payment, professionals can record it via the Add Payment option. Once you provide the service, issue an invoice.<\/p>\n<p><strong>Another key feature of Moon Invoice:<\/strong><\/p>\n<ul class=\"custom-disc-list\">\n<li><strong>Real-time Insights:<\/strong> Professionals can easily access real-time insights to evaluate data better.<\/li>\n<li><strong>Recurring Invoices:<\/strong> It is simple to set up recurring invoices for ongoing services, such as a subscription under which services are rendered. This also eases the <a href=\"https:\/\/www.mooninvoice.com\/blog\/what-is-revenue-recognition\/\">revenue recognition<\/a>.<\/li>\n<li><strong>AI-Powered:<\/strong> Moon Invoice is an AI-powered system that automatically extracts data from a receipt or invoice.<\/li>\n<li><strong>Expense Management:<\/strong> Professionals can streamline their expense management with a comprehensive digital solution.<\/li>\n<li><strong>Automate Recurring Billing:<\/strong> Professionals can easily automate recurring billing. This ensures correct &amp; on-time billing, which also impacts revenue recognition.<\/li>\n<li><strong>Project-Based Billing:<\/strong> Moon Invoice is a helpful platform for managing projects. Professionals can easily track their billable hours using the time tracker.<\/li>\n<\/ul>\n<div class=\"cta-sc\">\n<p class=\"cta-ttl\"><strong class=\"cta-ttl\">Take Control of Your Business Expenses<\/strong><\/p>\n<p class=\"cta-cnt\">Choose Moon Invoice and elevate your expense management to the next level. Stay organized, stay profitable!<\/p>\n<p><a class=\"btn\">Get Free Trial<\/a>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"Wrapping_Up\"><\/span>Wrapping Up<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Understanding and correctly identifying accrued vs. deferred revenue is a crucial concept for professionals to ensure they are on the right track with revenue recognition. It represents a clear picture of current financial performance and helps make the right decisions about business expansion, pricing strategy &amp; resource allocation. Additionally, accurate financial statements attract new investors and retain existing investors.<\/p>\n<p>Streamlining your business finances is one of the key steps to advancing your profession. Want to experience it? <a href=\"https:\/\/web.mooninvoice.com\/#\/signup\">Sign up for Moon Invoice<\/a> now.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"FAQs\"><\/span>FAQs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div id=\"1-link-25256\" class=\"sh-link 1-link sh-hide\"><h3 onclick=\"showhide_toggle('1', 25256, 'What is the difference between deferred revenue and ARR?', 'What is the difference between deferred revenue and ARR?'); return false;\" aria-expanded=\"false\"><span id=\"1-toggle-25256\">What is the difference between deferred revenue and ARR?<\/span><\/h3><\/div><div id=\"1-content-25256\" class=\"sh-content 1-content sh-hide\" style=\"display: none;\"><\/p>\n<p>Deferred revenue refers to the upfront payment the business receives for services or products that have not yet been delivered. It is recorded as a liability on the balance sheet. On the other hand, ARR (Annual Recurring Revenue) is the recurring revenue a business receives yearly from subscriptions or contracts.<\/p>\n<p><\/div>\n<div id=\"2-link-25256\" class=\"sh-link 2-link sh-hide\"><h3 onclick=\"showhide_toggle('2', 25256, 'Is deferred revenue a DR or a CR?', 'Is deferred revenue a DR or a CR?'); return false;\" aria-expanded=\"false\"><span id=\"2-toggle-25256\">Is deferred revenue a DR or a CR?<\/span><\/h3><\/div><div id=\"2-content-25256\" class=\"sh-content 2-content sh-hide\" style=\"display: none;\"><\/p>\n<p>Deferred revenue is recorded as a credit because the company has received money for goods or services that have not yet been delivered. It is recorded as a liability.<\/p>\n<p><\/div>\n<div id=\"3-link-25256\" class=\"sh-link 3-link sh-hide\"><h3 onclick=\"showhide_toggle('3', 25256, 'What are the three accrued revenues?', 'What are the three accrued revenues?'); return false;\" aria-expanded=\"false\"><span id=\"3-toggle-25256\">What are the three accrued revenues?<\/span><\/h3><\/div><div id=\"3-content-25256\" class=\"sh-content 3-content sh-hide\" style=\"display: none;\"><\/p>\n<p>The three accrued revenues are:<\/p>\n<div style=\"height: 10px;\"><\/div>\n<ol class=\"custom-number-list\">\n<li><strong>Interest Revenue<\/strong> \u2013 Interest income a business earns on a loan, savings account, or investment but has not yet received.<\/li>\n<li><strong>Service Revenue<\/strong> \u2013 Revenue the company generates from services delivered but payment is not yet received.<\/li>\n<li><strong>Rental Revenue<\/strong> \u2013 Revenue earned by renting out property, even though the payment has not been received.<\/li>\n<\/ol>\n<p><\/div>\n<div id=\"4-link-25256\" class=\"sh-link 4-link sh-hide\"><h3 onclick=\"showhide_toggle('4', 25256, 'Is accrued revenue DR or CR?', 'Is accrued revenue DR or CR?'); return false;\" aria-expanded=\"false\"><span id=\"4-toggle-25256\">Is accrued revenue DR or CR?<\/span><\/h3><\/div><div id=\"4-content-25256\" class=\"sh-content 4-content sh-hide\" style=\"display: none;\"><\/p>\n<p>Accrued revenue is recorded as debt (DR) and represents the income that you have earned but not yet billed. This also increases the assets on the balance sheet. In contrast, revenue increases when the bill is generated and the customer pays.<\/p>\n<p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Table of Contents What is Accrued Revenue?Accrued Revenue ExampleWhat is Deferred Revenue?Deferred Revenue ExampleKey Differences Between Accrued and Deferred Revenue: Accrued vs. Deferred RevenueAccrued Expense vs. Deferred ExpenseImpact of Deferred &amp; Accrued Revenue on the Financial StatementsAccounting Methods in Recognising Revenue: Accrual vs. Cash AccountingBest Practices to Follow for Managing the RevenueHow to Manage Accrued&hellip; <a class=\"more-link\" href=\"https:\/\/www.mooninvoice.com\/blog\/accrued-vs-deferred-revenue\/\">Continue reading <span class=\"screen-reader-text\">Accrued vs. Deferred Revenue: What&#8217;s the Difference?<\/span><\/a><\/p>\n","protected":false},"author":12,"featured_media":25257,"comment_status":"open","ping_status":"open","sticky":false,"template":"single-custom-post.php","format":"standard","meta":[],"categories":[1376],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v15.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Free Invoicing, Finance Tips &amp; Insights for Small Business<\/title>\n<meta name=\"description\" content=\"Get insights on invoicing, finance, and startup tips for small businesses, freelancers, and payment at Moon Invoice Blog.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Accrued vs. Deferred Revenue: Know the Key Differences\" \/>\n<meta property=\"og:description\" content=\"Discover the right information on the difference between accrued and deferred revenue to recognize the revenue accurately. 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