Accrued interest is the payment for the use of money. Many loans or notes are interest-bearing and have the following characteristics:
- Principal or face amount—the amount lent or borrowed.
- Maturity date——the date the loan must repaid.
- Maturity value—the total of the principal and interest at the maturity date.
- Interest rate—the percentage rate of interest. which is usually stated in annual terms and must be prorated for periods shorter than a year.
The “accrued interest on investment” is an asset that will be shown on the balance sheet under the heading current assets and “interest income” will become a part of the income statement.
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