Accrued interest

Definition:

Accrued interest refers to the interest that has been earned on a deposit or loan but  has not yet been paid or received. It represents the interest that accumulates over time before

the payment date arrives.

Example:

If you deposit ₹10,000 in a savings account with a 5% annual interest rate, after 6  months you have earned interest, but you haven’t received it yet. This is called accrued  interest.

How to understand accrued interest:

When you save or lend money, interest starts to grow each day. Banks usually pay interest monthly or yearly, not daily. 
The interest earned between payment dates is called accrued interest. 

Importance of Accrued Interest:

It helps track how much interest you have earned even if you haven’t received it yet.