Final answer:
Accrued revenue is revenue recognized when it is earned rather than when cash is received, commonly found in service industries, and represents an obligation to receive payment in the future. Correct option is b.
Step-by-step explanation:
Accrued revenue has specific characteristics that differentiate it from other forms of revenue. Firstly, accrued revenue is recognized when it is earned, rather than when cash is received. This shows that services or goods have been provided, but payment has not yet been received. Accrual accounting standards mandate this recognition to reflect the economic activity in the period it occurs, regardless of cash flow.
Furthermore, accrued revenue is common in service industries where services may be provided on a continuous basis, such as utilities, consultancy, or legal services. The expenses related to these revenues are often also recognized before cash is exchanged, which allows for the matching of revenues with related expenses in the same accounting period.
Lastly, accrued revenue represents an obligation to receive payment in the future. It is recorded on the balance sheet as an asset because it signifies a company's legal right to receive this payment. This asset is then realized as actual revenue on the income statement when the cash is finally received.