What is accrued interest?

The amount of accrued interest to be recorded is the accumulated interest that has yet to be paid as of the end date of an accounting period. Accrued interest is calculated as of the last day of the accounting period. For example, assume interest is payable on the 20th of each month, and the accounting period is the end of each calendar month.

What is accrued interest revenue?

However, for the lenders, this amount will be referred to as accrued interest revenue earned during the reporting period but not yet received. In this case, it is an income. It may be a loan from a bank or interest related to bonds. It is regarded as a current asset for the lender and current liability for the borrower.

How much interest is accrued during the accounting period?

The annual interest is $6,000 ($100,000 * 4%), and the monthly payment is $500 ($6,000 / 12). Assuming the accounting period ends on March 31 for both the lender and the borrower, the interest payment incurred within the period of March covers ten days. Therefore, the accrued interest for the accounting period will be $166.67 ($500 * 10/30).