Accrued Interest
Accrued interest is the interest that accumulates during the current accounting period but remains unpaid or unreceived until the next period. It reflects the cost or benefit of borrowed or lent funds over time, recorded as a liability or asset on the balance sheet. For example, if a loan’s interest is calculated monthly but paid quarterly, the interest accrued each month is recognized in the current period, even though payment occurs later. This ensures financial statements accurately represent obligations or earnings within the reporting timeframe.
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