Unbilled revenue represents income earned but not yet invoiced.It is a high-risk area because it directly affects turnover, GST reporting, and taxable income.
1. Introduction — Why Unbilled Revenue Is Sensitive
Unbilled revenue impacts:
Revenue recognition
Gross profit
GST cut-off
Taxable income
Improper handling leads to overstatement or understatement of income.
Incorrect revenue accruals attract scrutiny for both understatement and overstatement of income.
2. Objective
To ensure that at year-end:
All earned income is recognised
Revenue cut-off is correct
Unbilled/compiler revenue is properly identified
GST implications are addressed
Documentation supports recognition
3. What Is Unbilled Revenue?
Unbilled revenue arises when:
Goods are delivered but invoice pending, or
Services are rendered but billing milestone not triggered
Common in:
Services
EPC contracts
Retainers
Subscription-based models
4. CABTA Framework — “The 6-Step Revenue Accrual Process”
Step 1 — Identify Revenue Earned but Not Invoiced
Review:
Delivery challans
Service completion reports
Timesheets
Contract milestones
Only revenue earned as on 31 March qualifies.
Step 2 — Validate Revenue Recognition Criteria
Ensure:
Performance obligation satisfied
No significant uncertainty of collection
Future or contingent revenue must not be accrued.
Accruing uncertain revenue inflates profit and increases GST risk.
Step 3 — Compute Unbilled Revenue
Calculation based on:
Contract rate
Percentage completion
Time-based allocation
Calculation must be documented and verifiable.
Step 4 — Pass Revenue Accrual Entry
Unbilled Revenue A/c Dr
To Revenue A/c
Unbilled revenue is shown as current asset.
Step 5 — GST Implications Review
GST liability generally arises on invoicing
Accrued revenue must be tracked to ensure timely GST payment upon invoicing
Mismatch between revenue and GST must be explainable.