Recording accrued income for unbilled work

How to record a client's revenue for work done but not yet invoiced at year end, what to call the asset and how to keep it apart from receivables.

By Achekam · 11 October 2026 · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya

An engineering consultancy finishes the design stage of a project in the last week of the year and invoices at the next monthly billing run. A security company guards a client's site all month and bills on the first. A law firm has weeks of unbilled time on a matter that will be invoiced when it settles. Each has earned something the ledger has not recorded.

When the firm prepares these clients' statements, the year's revenue has to include that work, and the balance sheet has to show the right to be paid for it. The entries are not difficult. The harder questions are what to call the asset, what evidence supports the amount, and how to stop the income being counted twice when the invoice is eventually raised.

Earned, but not yet invoiced

ACCA's year-end adjustments article puts it simply: income received in advance (deferred income) is a liability, and income in arrears (accrued income) is an asset. AccountingTools describes the double entry the same way: accrued revenue is offset by an asset such as unbilled service fees, and its list of everyday accruals includes revenue for work completed but not yet billed.

The test is whether the client has done the work, or delivered the goods, that the income relates to. If it has, waiting for the invoice understates both revenue and assets for the year.

Accrued income or contract asset

For clients reporting under IFRS 15, the label matters. ACCA quotes IFRS 15's definition of a contract asset: the entity's right to consideration for goods or services it has transferred to a customer, when that right is conditioned on something other than the passage of time, such as the entity's future performance. ACCA's article on contract assets and liabilities explains that contract assets and contract liabilities, sometimes called accrued income and deferred income, must be accounted for separately from trade receivables, which arise when an invoice has been issued.

In practice, the firm should ask:

• Is the client's right to be paid conditional on doing more? If the design fee can only be billed once the next stage is accepted, the unbilled amount is a contract asset.
• Is the only thing missing the invoice itself? If the security company has an unconditional right to its monthly fee and is simply waiting for the billing run, the asset is closer to a receivable not yet invoiced.

Either way, the amount is not yet a trade receivable. Agree the terminology with the client once, and use it consistently in the trial balance, the statements and the notes.

Evidence that supports the amount

An accrual for unbilled work is only as good as the records behind it. What to ask for depends on the business:

Check post-year-end invoices against the accrual: if the first invoice of the new year covers a different amount, find out why. And ask whether any of the unbilled work is likely to be written down before it is billed. Time that will never be invoiced is not income.

The entry, and undoing it when the invoice is raised

At year end the entry recognises revenue and raises the asset. In the new year, when the invoice is issued, the sale is recorded in the ordinary way: receivable up, revenue up. Unless the year-end accrual is reversed, the new year's revenue includes the same work a second time.

So the year-end entry needs a matching reversal at the start of the new period, taking the accrued income out against revenue. After the invoice is posted, the new year's revenue shows only the difference between what was billed and what was accrued, which is usually small and explainable.

Confirm in the first month's ledger that the reversal was posted. It is easy to forget when the person who raised the accrual is not the person who processes the invoices.

Presenting it apart from receivables

The asset should appear on its own line, or in a clearly labelled note, rather than inside trade receivables. That separation matters to readers judging how quickly the client turns work into cash, and to auditors testing receivables against invoices.

In Achekam, presentation follows mapping. Achekam suggests where each trial balance line belongs, from the file's own mapping column, earlier mappings, AI or keyword rules, and no suggestion becomes an approved mapping until a person approves it. When the reviewer sees an "unbilled fees" or "accrued income" account suggested into trade receivables, that is the moment to move it. Where the client's template has no suitable line, a firm can add its own statement lines and groups and rename row titles, and later builds keep those choices, so a "Contract assets" line set up once stays in place.

Posting the adjustment in Achekam

Where the accrual is a year-end adjustment rather than a journal already in the client's ledger, staff can post a year-end adjusting entry in Achekam's Studio. If it proves wrong, it is reversed with a record of who did it and why, never deleted.

Journals proposed from documents, bank lines or adjustments are treated as candidates only: a person approves and posts each one, and AI is refused both steps. So when the client's first invoice of the new year is proposed for posting, a person sees it before it reaches the books, which is the natural point to check that the accrual has been reversed.

The broader question of when unbilled amounts become contract assets or liabilities is covered in contract assets and liabilities, and adjusting entries at year end places this entry among the rest of the close. For clients who bill in arrears, ask for their billing run reports and time records with the year-end pack; they are the quickest route to a supportable figure.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.