Accrued interest is that interest which is not yet paid, though is accumulating periodically (maybe daily or monthly) on a deposit, loan or other security.
As an example, let's say you have a savings account that pays interest monthly.
Each day, an amount of interest accrues, which is owed to you either at the end of the month or, upon earlier closure of the account, to the date of closure.
In the case of a bond, the value of the bond before its next interest payment is its current price plus any unpaid interest, which is the 'accrued interest'.
Understanding accrued interest is crucial in investment management and personal finance matters as it impacts the value of bonds and loan securities.
Keeping track of accrued interest helps investors and borrowers ensure they receive or pay the correct amounts, maintaining financial accuracy.