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In finance, accrued interest is the interest on a bond or loan that has accumulated since the principal investment, or since the previous coupon payment if there has been one already.
For a type of obligation such as a bond, interest is calculated and paid at set intervals (for instance annually or semi-annually). However ownership of bonds/loans can be transferred between different investors at any time, not just on an interest payment date. After such a transfer, the new owner will usually receive the next interest payment, but the previous owner must be compensated for the period of time for which he or she owned the bond. In other words, the previous owner must be paid the interest that accrued before the sale. This is generally done in one of two ways, depending on market convention:
On the other hand, if the sale is made during a short set period immediately before the next interest payment, then the seller, not the buyer, will receive the interest payment from the issuer of the loan (the borrower), and