Accrued income vs deferred income: what's the difference?
Accrued income and deferred income are opposites — one is an asset, one a liability. Here's how to tell them apart, with examples.
This walkthrough explains the difference between accrued income and deferred income, covering how each arises when invoice timing and revenue recognition diverge, where each sits on the balance sheet, and how to classify income items correctly at period end. It helps UK finance teams, accountants and Xero users who need to apply accruals and deferred income treatment accurately.
Accrued income and deferred income both bridge the gap between when you invoice and when you earn — but they pull in opposite directions.
Accrued income (an asset)
You've earned the revenue but haven't invoiced it yet. Example: you've delivered consultancy in March but won't bill until April. You recognise the income in March and hold it as an asset (accrued income) until invoiced.
Deferred income (a liability)
You've invoiced or been paid but haven't delivered yet. Example: an annual subscription billed in January that you'll earn across the year. It sits as a liability and releases into revenue over time.
Side by side
| Accrued income | Deferred income | |
|---|---|---|
| Earned? | Yes | Not yet |
| Invoiced? | Not yet | Yes |
| Balance sheet | Asset | Liability |
| Direction | Revenue ahead of invoice | Invoice ahead of revenue |
Keeping both straight
Both need schedules that tie back to the ledger. WorkWithLottie manages deferred income recognition automatically and reconciles the balance to Xero.
Related: What is deferred income? · How to record deferred revenue in Xero
Frequently asked questions
Is accrued income an asset or a liability?
Accrued income is an asset. You've earned the revenue but not yet invoiced it, so it's owed to you.
Is deferred income the same as unearned revenue?
Yes. Deferred income, deferred revenue and unearned revenue all describe money received before the work is delivered — a liability.
More on Deferred income
All guidesWhat is deferred income? Definition & examples
A plain‑English definition of deferred income (deferred revenue), why it's a liability, and how it's recognised over time.
ReadHow to record deferred revenue in Xero (with journal examples)
Invoiced up front but haven't delivered yet? Here's how to record deferred revenue in Xero and recognise it correctly, month by month.
ReadDeferred income & revenue recognition explained
What deferred income is, why it sits on the balance sheet, and how to recognise revenue correctly — with a simple example.
ReadLet Lottie handle this for you
Automate accruals, prepayments and deferred income on top of Xero. Start your free 7-day trial.
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