What is the journal entry for unbilled revenue?

Sometimes a business may earn an income by delivering the goods/services within the stipulated time. But the business may not have issued an invoice to the customer. Such a scenario is what is called unbilled revenue.

Note that as per the accrual concept of accounting, sales are recognized on the day it was made, irrespective of whether the business receives cash or not.

The business records unbilled revenue by passing the following journal entry:

Unbilled Revenue is treated as an asset because it is yet to be fully recognized as an income. Therefore it is debited. Revenue A/c is credited as there is an increase in income.

Once the bill/invoice has been issued to the customer, the following entry is passed to close the Unbilled Revenue A/c.

Let me explain this concept with an example,

Luca Traders, a business dealing in stationery and office supplies receives an order on August 5th for 1,000 pens worth 10 each. On August 8th they deliver the pens but they are yet to issue an invoice to the customer. They issue the invoice only on August 13th.

So the sales revenue of 10,000 (1,000*10) will be treated as an unbilled revenue for the period of August 8th – August 12th. On August 8th the following entry is made to record unbilled revenue.

When the invoice is sent to the customer on August 13th, the following journal entry is posted to close the unbilled revenue A/c.