Final answer:
Accrued revenues are earned revenues that have not yet been received or invoiced. They are recorded to adhere to the matching principle in accounting, ensuring that revenues are matched with the period expenses are incurred. This concept is crucial for accurate financial reporting.
Step-by-step explanation:
Accrued revenues are revenues that have been earned by a company for products delivered or services provided, but have not yet been received in cash or recorded at the statement date. Such revenues are often the result of credit sales, services performed but not billed, or other earned revenues that have not yet been invoiced. In accounting, accruing these revenues is important because it adheres to the matching principle, where revenues are recorded when they are earned, regardless of when the cash is actually received. As an example, a company that has provided consulting services in December but has not sent out invoices will record these revenues as accrued revenues at the end of December, ensuring that the revenues are matched with the expenses of the same period even if payment is received in January. Accrued revenues are reported under the current assets section of the balance sheet as they represent an amount that will be received within a year and have a corresponding accrual entry in the income statement, reflecting the revenue earned.