Is Service Revenue a Current Asset?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 23, 2024

No, service revenue is not a current asset for accounting purposes.

A current asset is any asset that will provide an economic value for or within one year. Service revenue refers to revenue a company earns from performing a service.

For accounting purposes, revenue is recorded on the income statement rather than on the balance sheet with other assets. Revenue is used to invest in other assets, pay off liabilities, and pay dividends to shareholders.

Therefore, revenue itself is not an asset.

How to Record Service Revenue for Accounting Purposes

As mentioned above, service revenue is recorded on the income statement along with other revenues.

Revenue is not recorded on a balance sheet but is accounted for on a balance sheet using other entries, such as sales, accounts receivable, and cash.

This is typically done through a double entry system which uses debits and credits.

A double-entry system records a debit on one side of the balance sheet and a credit on the other side. The two sides need to “balance” — hence the term “balance sheet.”

If services have been performed and revenue has not yet been collected, then the amount to be collected will fall under “accounts receivable” on a company’s balance sheet.

Accounts receivable are funds that a company is owed by clients who have received a good or service, such as a handyman who performs a service for a client and sends an invoice, but has not been paid.

When an invoice is created, it should be accounted for through a debit entry to the accounts receivable account and a credit to the sales account.

When the invoice is paid, a credit will be added to accounts receivable and a debit entry will be made for cash.

While service revenue is not a current asset, accounts receivable and cash generated by the service revenue are recorded as a current asset on the balance sheet.

Accounting for Service Revenue Summary

To summarize, service revenue is reported on an income statement and is not an asset (nor a current asset).

Accounts receivable and cash are reported on the balance sheet and are both current assets.

View this Balance Sheet Example to understand other items that are recorded on the balance sheet.

Is Service Revenue a Current Asset? FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.