Adjusting Entries for Prepaid Revenue and Accrued Revenue

What this note covers

1. The Accrual Basis and Why Balance-Day Adjustments Are Necessary
2. Prepaid Revenue: Recognition as a Liability and the Earning Adjustment
3. Worked Example — Prepaid Revenue (Rental Income Received in Advance)
4. Accrued Revenue: Recognition as an Asset
5. Worked Example — Accrued Revenue (Consulting Fees Earned but Not Yet Received)
6. Comparison: Prepaid Revenue vs Accrued Revenue — Key Differences and Reporting Effects
7. Linking Adjustments to the Qualitative Characteristics and Accounting Assumptions

7 sections · 14 key terms & formulas · 6 common mistakes