Fees earned definition

What are Fees Earned?

Fees earned is a revenue account that appears in the revenue section at the top of the income statement. It contains the fee revenue earned during a reporting period. The amount reported as fees earned would be the amount of cash received from customers during the reporting period, if the reporting entity is operating under the cash basis of accounting. Alternatively, the account contains the amount of fees actually earned during the reporting period, irrespective of the amount of cash received from customers, if the reporting entity is operating under the accrual basis of accounting.

The Fees Earned account is most commonly used in the services industry, where it contains billings for such services as tax consulting, auditing fees, and general consulting. The account can also be used in situations where a mix of goods and services are sold to customers; in this case, revenues are apportioned between the Fees Earned account (for services rendered) and one or more goods sold accounts.

Presentation of Fees Earned

Fees earned are presented at the top of the income statement for a business that generates a significant amount of its revenues from services. If the amount of fees earned is relatively small, it may be aggregated into a single revenue line item, along with the sales from goods. A sample presentation appears in the following exhibit.

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Terms Similar to Fees Earned

Fees earned is similar to services rendered, since both concepts usually center on the provision of labor-based services.