Accrued interest is the payment for the use of money. Many loans or notes are interest-bearing and have the following characteristics:

  1. Principal or face amount—the amount lent or borrowed.
  2. Maturity date——the date the loan must repaid.
  3. Maturity value—the total of the principal and interest at the maturity date.
  4. 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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