What is Accrued Interest?

Accrued Interest is the amount of interest that has been earned on a loan or investment but has not yet been paid or received. In accounting, this interest must be recorded in the period it is earned, in line with the accrual principle.

For Startups: For a startup that has taken a loan (like venture debt), the interest expense accrues daily, even if the payment is made monthly or quarterly. The accounting records must reflect this daily accrual to show the true interest liability on the balance sheet at any given point.

Example: A startup has a loan with a monthly interest payment of ₹30,000 due on the 1st of the next month. At the end of the current month, it will record ₹30,000 as an accrued interest expense, even though the cash has not yet been paid.