 Accrued revenue is an example of an accrual adjusting entry. It occurs when revenue is earned before the cash is received. Let's look at this example. Assume on January 1, Morrissey produces a new record album from the rock band in 1975. He forgets to bill them $10,000 at the time of service. How would he make an adjusting entry to record this revenue as of January 31st? When we record revenue, we always debit a receivable account and credit a revenue account. In this example, we would debit accounts receivable and credit service revenue for $10,000. Let's look at one more example, one more common type of accrued revenue example. Assume on April 1, Zions Bank lends the smiths $50,000 to finance a reunion tour. The terms are 5% interest and this is a one year loan. The journal entry on April 1 is a debit to notes receivable and a credit to cash for $50,000. Is this an adjusting entry? No, because there's an underlying event that happened on April 1st. The adjusting entry needs to be recorded at the end of the year, let's assume. So as of December 31st, what has Zions Bank earned but not yet collected? The answer is interest revenue. But in order to make the adjusting journal entry to record the accrued interest revenue, we must first figure out how much interest they've earned. How do we calculate interest? I use the acronym PERT, principle times rate times time. Please note that the interest rate is always an annual rate, so we need to make sure that time is always in terms of one year. In this example the principle is $50,000 times 5% annual interest times 9 twelts of the year. April 1 to December 31st is 9 months. Thus the amount of interest revenue to accrue is $1,875. Remember that we debit a receivable and credit a revenue when we are recording an adjusting entry to accrue revenue. In this example we debit interest receivable and we credit interest revenue for $1,875. If you want to see how the smiths would record the adjusting entry from their perspective, I would encourage you to watch the next video for accrued interest expense.