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Accrued Interest

Accrued Interest : A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, but not yet paid or received. Accrued interest occurs as a result of the difference in timing of cash flows and the measurement of these cash flows.


The accumulated coupon interest, paid to the seller of a bond by the buyer (unless the bond is in default).

For example, accrued interest receivable occurs when interest on an outstanding receivable has been earned by the company, but has not yet been received. A loan to a customer for goods sold would result in interest being charged on the loan. If the loan is extended on August 1 and the lending company's year ends on December 31, there will be four months of accrued interest receivable recorded as interest revenue in the company's financial statements for the year.

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