Final answer:
Accrued income or work in progress (WIP) is considered an asset as it represents the value of incomplete work that holds future economic benefits for a company.
Step-by-step explanation:
Accrued income, also known as work in progress (WIP), is considered an asset. This is because it represents products or services that are partially completed and therefore, hold future economic value for a company or individual. On a balance sheet, assets are items of value that are owned, which can be used to produce something. For example, cash can pay tuition and homes can provide shelter while potentially increasing in value. In contrast, a liability is a debt or something owed, such as a mortgage. In accounting terms, on a bank's balance sheet, net worth is calculated by subtracting liabilities from assets. A healthy business will have a positive net worth, demonstrating more assets than liabilities.
Therefore, when you account for accrued income on a balance sheet, you're recording the value of the work that has already been done but hasn't yet been paid for by the client, which is an asset to the business. A bank's balance sheet, as well as any other business's financial statements, reflect this principle with assets always equaling liabilities plus net worth.