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Bhaskar Unnikrishnan CPA CMA (Accounts / Administration)     30 August 2012

Journal entries for unbilled revenue

When we sell the goods to the buyer of goods, we are able to show our revenue in our books as per the accrual concept of accounting. Whether we have obtained the cash from sale or not, we show total sale revenue in our income statement. Unbilled revenue case is different from outstanding revenue. It is that
revenue which we have earned but we still did not write the bill or invoice for getting the revenue. For example, we are service company. We have completed the project. When we have completed the project, we issue the bill end of the 3rd day  after providing the service. But we did not issue the bill at end of third day but we have issued the bill at the end of 10th day after providing the service. So, revenue between the end of 3rd day and end of 10th day will be our unbilled revenue.

We have to pass the following entry of its record. 

1. For Recording of Revenue 

Unbilled Account Receivable Account Debit
 
       Revenue Account Credit

We have debited the unbilled account receivable account because these are the part of our asset but still unbilled. By showing it as Unbilled in FS, it will be helpful for auditor to know their detail.

We have credited the revenue account because whether we have obtained cash or not from sale, it is our earning and every earning will be credited in the journal entry.

2. When bill has been issued to the party.

Account Receivable Account Debit

Unbilled Account Receivable Account Credit

Benefit of Passing Unbilled Revenue Journal Entry

You may think, what is the benefit of passing Unbilled revenue when we correct this transaction by transferring it to account receivable account. On this, I want to say that big company appoints billing auditor (Internal auditor) for checking the procedure of billing department. If they find above first entries of different debtors, they can get help for further investigation. Any mistake or error in the billing time may be correct fastly before affecting any budget or our financial plan.

 

Source:    https://www.svtuition.org/2012/08/journal-entries-for-unbilled-revenue.html



 3 Replies

CA Saiyum khan

CA Saiyum khan (Practicing CA)     30 August 2012

In the modern ERP base accounting system the software is configured some what similar as has been explained. 

Bhaskar Unnikrishnan CPA CMA

Bhaskar Unnikrishnan CPA CMA (Accounts / Administration)     30 August 2012

Thank you Mr Khan... I think just computerizing works without proper understanding will not help in longer term...
Neethi V. Kannanth

Neethi V. Kannanth (.)     20 January 2021

How should revenue be recorded in case of construction contracts in the books of contractor if the construction is still not completed?


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