Which of the following best describes accrued revenue?

• A. Revenue that is recognized after all related expenses have been paid.
• B. Revenue that has been received in cash but not yet earned.
• C. Revenue that has been earned but not yet received in cash or recorded at the end of the accounting period.
• D. Revenue that is recorded only when cash is received, regardless of when it is earned.

Answer: (C)

Verified step by step guidance

1. Understand the concept of accrued revenue: Accrued revenue refers to revenue that has been earned by providing goods or services but has not yet been received in cash or recorded in the accounting system by the end of the accounting period.
2. Review the options provided in the problem and eliminate incorrect choices: For example, 'Revenue that is recognized after all related expenses have been paid' is incorrect because accrued revenue is not dependent on expense payment.
3. Analyze the option 'Revenue that has been received in cash but not yet earned': This describes unearned revenue, not accrued revenue, so it is also incorrect.
4. Evaluate the option 'Revenue that is recorded only when cash is received, regardless of when it is earned': This describes cash basis accounting, which is not applicable to accrued revenue under accrual accounting principles.
5. Select the correct option: 'Revenue that has been earned but not yet received in cash or recorded at the end of the accounting period' accurately describes accrued revenue, as it aligns with the accrual accounting principle of recognizing revenue when earned, regardless of cash receipt.