accrued interest investment & finance definition

Interest that is owed on a fixed-income security such as a bond. Interest accrues on bonds between regularly scheduled interest payments, which usually occur every six months. When a bond is sold in the secondary market, the buyer pays the price and the accrued interest and is reimbursed for it when the issuer makes the next interest payment. For corporate and municipal bonds, accrued interest is calculated using a 360-day year; for government bonds, accrued interest is calculated on an actual calendar-day basis. If a bond is in default, there is no accrued interest.  Accrued interest also shows up as a current liability on a company’s balance sheet.