accrued income

What Is Accrued Income?

Accrued income refers to revenue that has been earned but for which cash has not yet been received. The key principle is whether the service has been delivered or the obligation fulfilled, rather than whether payment has been collected. It focuses on “what has been earned” rather than “what has been paid.”

In traditional scenarios, monthly subscription services recognize revenue at the end of each month, even if the customer pays in the following month. On-chain, staking rewards or lending interest accumulate continuously and are displayed in user interfaces as “unclaimed” or “accrued earnings”—these represent accrued income within digital assets.

How Does Accrued Income Work?

The principle of accrued income stems from the accrual accounting method: revenue is recognized based on performance and obligations, not on cash receipts. As long as value has been generated, it should be reflected on the books.

For example: if you operate a validator node for a day and meet the agreed performance criteria, that day’s rewards should be recorded as accrued income—even if the reward tokens will only be distributed the next day. This approach ensures that reports more accurately and promptly reflect business performance.

How Is Accrued Income Reflected in Web3?

In Web3, accrued income is mainly found in cumulative yet unclaimed earnings such as staking rewards, lending interest, market making fees, and royalties.

Staking rewards are earned by delegating tokens to network validators, typically accumulating per block or per day. On-chain lending interest grows over time, with asset dashboards displaying “increased earnings” as accrued amounts. Market makers who provide liquidity to decentralized exchanges earn transaction fees, which accumulate proportionally in the liquidity pool—these fees remain accrued income until withdrawn. Similarly, NFT royalties that are auto-accrued per transaction but not yet distributed to a wallet also count as accrued income.

How Does Accrued Income Work in DeFi?

DeFi protocols typically update earnings metrics per block or per second, causing your balance to “grow” over time—the increase represents accrued income. Most lending protocols use an interest index to accumulate returns: your token balance multiplied by the change in this index reflects your period’s interest.

For example, if you lend out stablecoins, the annual interest rate may change dynamically within the protocol. Your asset balance slowly rises without you manually claiming earnings; this growth is accrued income. When you redeem or claim, the accrued earnings convert to cash (or spendable tokens). As of October 2024, leading lending protocols typically accrue interest per block and display it in real time on their interfaces.

How Can You View Accrued Income on Gate Earn?

Within Gate’s Earn products, earnings are usually accrued daily or at a product-specific frequency and shown on the page as “accumulated earnings” or “to be distributed.” You can check them with these steps:

Step 1: Log in to your Gate account and enter the “Earn” section.

Step 2: Select a purchased product and open its details page.

Step 3: In the earnings area, view fields like “accumulated earnings” or “yesterday’s earnings”—these reflect your accrued income’s progress and status.

Step 4: Review the product’s interest calculation rules and distribution frequency to know when accrued income will be credited to your available balance.

Financial products involve risks to both earnings and capital safety, including uncertain returns, platform or strategy failure, and token price fluctuations that may result in principal loss. Always read product terms and assess your risk tolerance before purchasing.

What Is the Difference Between Accrued Income and Cash Income?

Accrued income focuses on value that has already been earned, while cash income tracks money actually received. The former improves reporting timeliness; the latter reflects true cash inflows.

This difference affects liquidity planning and tax timing: having accrued income on paper does not mean available cash—you must consider cash flow management. Tax recognition timing may also vary by jurisdiction; always follow local regulations and seek professional advice.

What Are Common Methods for Calculating Accrued Income?

Two common methods are simple daily accrual and compound (rolling) accrual. For daily simple interest: Accrued Income = Principal × Annual Rate × Number of Days ÷ 365. With compounding, each cycle’s interest is added to the principal for future calculations.

Crypto products often list APR (Annual Percentage Rate) and APY (Annual Percentage Yield). APR ignores compounding; APY includes it. For instance, with a 10% APR and 1,000 tokens held for 30 days, your simple interest accrued is approximately 1,000 × 10% × 30 ÷ 365 ≈ 8.22 tokens. If APY is 10% with daily compounding, the actual accrued amount will be slightly higher.

Some lending protocols accrue interest per block by splitting annual rates into tiny per-block increments that accumulate in your balance—this is why you see your balance slowly increasing over time.

What Are the Risks and Compliance Considerations for Accrued Income?

Accrued income is not guaranteed cash—it may decrease or become unavailable due to price volatility, protocol failures, or counterparty risk. The “accumulated earnings” you see may shrink in fiat value during extreme market swings.

On compliance: tax requirements vary by jurisdiction. Some regions recognize income based on accrual accounting; others use cash accounting. When filing taxes or ensuring compliance, keep complete records and consult local professionals.

How Should Individuals and DAOs Record Accrued Income?

Step 1: Identify sources. Categorize accrued income sources such as staking, lending, market making, royalties, or service contracts.

Step 2: Create a ledger. Record start times, rate types (APR or APY), accrual frequency, protocol or product names, wallet addresses or account IDs.

Step 3: Retain documentation. Download or screenshot platform earning pages, blockchain explorer transaction records, protocol report links, and archive them by date.

Step 4: Reconcile regularly. Weekly or monthly, reconcile platform-displayed accumulated earnings with your own calculations; if there’s a significant difference, check interest rules or rate changes.

Step 5: Prepare for tax filing. Determine reporting method and timing per local regulations; keep necessary receipts and reports. DAOs can use multi-signature wallets or governance processes to approve distributions, ensuring audit traceability.

Trends and Summary of Accrued Income

As of October 2024, leading DeFi and wealth management products increasingly accrue and display income automatically in real time—per block or daily—and on-chain accounting tools continue to improve. Understanding accrued income enables better reporting, fund planning, and risk control: knowing when to recognize it, how to calculate it, where to view it, how to record it, and how to ensure compliance. Whether you are an individual or a DAO, incorporating accrued income into routine management is key for better decision-making and transparency.

FAQ

What Is the Difference Between Accounts Receivable and Accrued Income?

Accounts receivable refers to confirmed but unpaid monetary amounts owed to you, while accrued income is revenue that has been earned but may not have been invoiced or received yet. In simple terms, accounts receivable means “money owed to you,” while accrued income means “money you have earned but haven’t received yet.” In crypto assets, accrued income is often seen as cumulative rewards from liquidity mining, lending interest, etc., that have not yet been claimed.

Why Track Accrued Income Separately Instead of Just Recording Cash Income?

Accrued income reflects actual economic performance regardless of when payment is received. If you only track cash income, financial reports can be misleading—for example, if you earn money in December but receive payment in January, cash accounting would show higher January income and lower December income. Accrual accounting accurately presents economic results—this is required by International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP).

How Should DeFi Liquidity Mining Rewards Be Recorded as Accrued Income?

In DeFi, providing liquidity results in continuous reward accrual every block—even if unclaimed, these count as accrued income. To record this: increase “accrued rewards” (a current asset) on your balance sheet and record “realized but unclaimed reward income” in your income statement. It’s recommended to periodically check cumulative rewards data on platforms like Gate as proof of accrued income.

How Can Individual Investors Simplify Accrued Income Tracking?

Use a “monthly summary method”: at each month’s end, tally all unclaimed rewards across DeFi platforms, lending protocols, and liquidity mining in your personal ledger under “accrued income.” Use export features from platforms like Gate to automate data collection and avoid manual errors. The key is saving screenshots of transaction proofs for audits or tax filing later.

What Tax Issues Should You Watch for With Accrued Income?

In most countries, accrued income is taxed on an accrual basis—even if no cash is received yet. This means mining rewards are considered taxable at the moment they are earned. Consult local tax professionals to understand how crypto-accrued income is treated in your jurisdiction and avoid compliance risks due to misunderstandings. Some regions may have different standards for recognition.