What is Accrued Interest?

Accrued Interest refers to interest expenses that have accumulated on a debt or bond but haven’t yet been paid. It’s a liability for borrowers and an asset for lenders.

How Accrued Interest Works

• Calculated daily or periodically but typically paid monthly, quarterly, or annually

• Recorded in financial statements before the payment is made

Example

A business takes out a loan on November 1 with monthly interest payments. By November 30, the interest for the month is accrued, even if paid in December.

Benefits

• Ensures accurate financial period reporting

• Tracks liabilities for debt management

• Supports compliance with accounting standards