What is assets understated in accrued revenues and it's example?

When assets are understated in accrued revenues, it means that the company has not recorded or recognized all the revenues it has earned but has not yet received. This typically occurs when a company provides goods or services to a customer but has not yet received payment for them.

An example of assets being understated in accrued revenues is when a consulting firm completes a project for a client in December but does not receive payment until January of the following year. In this case, the consulting firm would recognize the revenue earned in December as an accrued revenue on its balance sheet, even though the cash has not been received. If the firm fails to record this accrued revenue, its assets would be understated, as the revenue earned has not been recognized.