acrued revenue

What Is Accrued Revenue?

Accrued revenue refers to income that a business has earned by delivering goods or services, even though payment has not yet been received. This concept follows the accrual basis of accounting, meaning revenue is recognized when economic activity occurs, rather than when cash is actually collected.

In everyday business scenarios, such as annual subscription services or multi-phase project deliveries, accrued revenue is recognized for each period in which performance obligations are fulfilled. Within the crypto space, accrued revenue is evident in areas like on-chain lending interest that grows over time, or commissions from validator and delegated staking services. Here, earnings accumulate over time or blocks, rather than being recognized only when withdrawn.

Why Is Accrued Revenue Important?

Accrued revenue ensures financial statements accurately reflect the true progress of business operations, without being distorted by the timing of cash receipts. This enables management and investors to better assess earnings quality and sustainability.

Focusing only on cash revenue can make financial results appear volatile, as peaks and valleys are influenced by payment dates. Accrued revenue, however, aligns recognition with delivery milestones, providing a clearer picture of actual product or service fulfillment. This approach is especially critical for subscription-based businesses, project-based delivery models, and Web3 activities where earnings accumulate over time.

How Is Accrued Revenue Recognized in Accounting?

Accrued revenue is recognized based on three criteria: performance has occurred, the amount is measurable, and collectability is reasonably assured.

Step 1: Identify performance obligations. Clearly define the promised goods or services and determine whether progress should be recognized over time or upon output delivery.

Step 2: Determine transaction price. Refer to contract terms for consideration; if payment involves tokens, fair value must be established (typically based on market price at the date of transaction).

Step 3: Measure progress toward fulfillment. Common methods include “time elapsed” or “output milestones.” Multiply the percentage of progress by the transaction price to calculate accrued revenue for the period.

Step 4: Record the transaction. Typically, recognizing revenue creates a contract asset or accounts receivable entry, which is converted to cash upon invoicing or collection. If invoicing criteria are unmet, record as a contract asset; if invoicing has occurred, classify as accounts receivable.

International financial reporting practices reference IFRS 15 / ASC 606’s five-step model for revenue recognition. As of 2025, audited internet and crypto-related companies commonly follow this framework to ensure consistency and comparability.

How Is Accrued Revenue Reflected in Web3 Scenarios?

In Web3, accrued revenue often arises from earnings accumulated over time or blocks, as well as fees generated upon transaction completion. Although blockchain enables instant settlement of funds, revenue recognition is still based on whether performance obligations have been met.

• Lending protocols: Lenders accrue interest by the second or per block; protocol or custodian management fees also accumulate over time. Untaken interest and fees are considered accrued revenue.
• Staking services: Validator operators earn commissions with each block produced; these unclaimed earnings are accrued revenue. For Ethereum, block times average around 12 seconds (as of 2025), so rewards accumulate with each block.
• Transaction fees: Fees are earned as soon as trades are matched, regardless of whether clearing or settlement occurs later.

What Is the Difference Between Accrued Revenue and Cash Revenue?

Accrued revenue emphasizes “earned but not yet received,” while cash revenue focuses on “cash already collected.” The recognition timing differs, but both metrics matter.

Under accrual accounting, companies recognize accrued revenue during the period when services are rendered; under cash accounting, revenue is recorded only when payment is received. For operational analysis, accrual accounting more accurately reflects business performance; for cash flow management, cash accounting highlights liquidity status. Financial management typically considers both: income statements rely on accruals, while cash flow statements focus on actual receipts.

How Is Accrued Revenue Calculated?

The core principle is “fulfilled performance proportion × total consideration,” or accumulation based on contractual rates over time.

Step 1: Determine recognition method. For subscriptions/maintenance, recognize by elapsed time; for projects/milestones, recognize by output progress; for interest/fees, accrue per contract rate.

Step 2: Calculate period amount. Multiply total price by completion ratio for the period, or accrue based on daily/block rates through period end.

Step 3: Record and offset. Record as income and create a contract asset/accounts receivable entry; convert accrued amounts to cash upon collection or withdrawal.

Example 1 (Subscription): Annual fee of 1,200 yuan for a 12-month service; monthly accrued revenue is 100 yuan. If service is delivered but payment not received for a given month, recognize 100 yuan as accrued revenue.

Example 2 (On-chain interest): Lending principal of 1,000 USDT at a 5% annual rate, accrued daily; for a 30-day month: Accrued revenue = 1,000 × 5% × 30/365 ≈ 4.11 USDT. This amount is recognized as accrued revenue until withdrawn.

What Are Some Accrued Revenue Scenarios on Gate Platform?

On Gate, trading fees are recognized immediately upon trade execution as accrued revenue; user-facing metrics like “cumulative earnings / pending payout” also reflect accrued logic tied to time-based or daily settlement.

• Trading fees: Fees are recognized when orders are matched and included in current period income; clearing or transfers happen later.
• Financing/lending interest: Interest accrues hourly or daily; unpaid portions within the period count as accrued revenue and are settled at interest points.
• Investment products & promotions: Products with “daily accruals and periodic payouts” accumulate accrued revenue during the accrual stage and convert to cash only on payout day.

These arrangements help both platform operators and users distinguish between “earned” and “received” amounts from business and investment perspectives.

What Are the Risks and Compliance Considerations for Accrued Revenue?

The main risks include premature recognition, uncertainty of collection, and token price volatility. Compliance requires clear evidence of performance fulfillment, reliable measurement methods, and comprehensive disclosure.

• Early recognition: Recognizing revenue before performance obligations are fulfilled can inflate results. Progress must be supported by contracts and service records.
• Collectability: If client creditworthiness is questionable, even completed obligations may require impairment allowances or slower recognition.
• Token volatility: When settling in tokens, use fair value at transaction date; subsequent price fluctuations should be disclosed separately from revenue recognition.

As of 2024–2025, audited crypto and internet companies widely adopt accrual accounting and disclose detailed policies for revenue recognition, contract assets, and accounts receivable in financial statement notes to minimize misunderstanding and manipulation.

How Is Accrued Revenue Presented in Financial Statements?

On the balance sheet, accrued revenue appears as “contract assets” or “accounts receivable”; on the income statement, it is included under “operating revenue” or “main business income.” Once invoiced or payment conditions are met, contract assets convert to accounts receivable; after collection, these assets become cash.

In accompanying notes, companies disclose policies for revenue recognition, methods for measuring performance progress, and movements in contract assets/accounts receivable. For token-settled transactions, fair value determination methods and exposures to currency/exchange rate risks must also be disclosed.

Overall, accrued revenue prioritizes “business progress,” helping external stakeholders understand the real operational rhythm. When combined with cash flow information, it enables a comprehensive assessment of a company's financial health and earnings quality.

FAQ

Are Accounts Receivable and Accrued Revenue the Same Thing?

Not exactly. Accounts receivable refers specifically to amounts already recognized as income but not yet collected—classified as assets. Accrued revenue is broader, including all earned but unpaid income; accounts receivable are one form of accrued revenue. In short: accounts receivable are a subset of accrued revenue.

Why Must Companies Use Accrued Revenue Rather Than Cash Revenue for Accounting?

This is a core requirement of accounting standards—to accurately reflect business results. Recording only cash would distort financial statements. For example, services delivered this month should be recognized as income this month even if customers pay next month. This approach allows investors and creditors to more scientifically assess company value.

Can Accrued Revenue Become Bad Debt?

Yes, there is such a risk. Accrued revenue assumes collectability; if clients fail to pay, it can turn into bad debt. To mitigate this risk, businesses typically set aside allowances for doubtful accounts. Regular evaluation of accounts receivable recoverability and prompt adjustment for high-risk clients help maintain financial data integrity.

How Are Trading Fee Revenues Recognized on Crypto Exchanges Using Accrual Accounting?

Fee income should be recognized at the moment a trade is executed—even if users have not withdrawn funds yet. For example: when a user completes a trade on Gate resulting in a fee charge, that fee should be recorded as income in the trading period itself rather than upon withdrawal. This ensures an accurate reflection of platform performance during each accounting period.

What Is the Difference Between Accrued Revenue and Deferred Income?

They are fundamentally opposite concepts. Accrued revenue refers to earnings that have been realized but not yet collected (such as fulfilled orders pending payment), whereas deferred income relates to money received before goods or services have been provided (such as prepaid deposits). Accrued revenue increases accounts receivable; deferred income increases liabilities. Understanding both concepts is essential for accurate financial reporting.