Accrued interest receivable

Accrued interest receivable records interest earned through the reporting date but not yet collected. It is separate from the note principal when the entity tracks a different allowance, nonaccrual, writeoff, or presentation policy for interest.

Separate principal from earned interest

Suppose a $120,000 note earns 6 percent annual interest and pays interest every June 30. At March 31, three months of interest has accrued:

$120,000 × 6% × 3/12 = $1,800

The lender records $1,800 of interest revenue and accrued interest receivable. The $120,000 principal has not changed. Collection on June 30 settles the accrued interest; it does not reduce principal unless the contract says that cash also repays principal.

Control the policy

Keep the note, accrued interest, cash, and allowance records distinct. A missed interest payment may affect nonaccrual, credit-risk grading, or the estimate of expected cash shortfalls. It does not turn interest into principal. Document whether accrued interest is included in the note balance, presented separately, written off through a practical policy, or included in the allowance population.

Boundary and source

This calculation assumes the note remains on accrual status and uses a supported yield schedule. It does not decide collectibility, nonaccrual status, or contractual default. Read ASC 326-20-30-5 for accrued-interest components and ASC 326-20-30-5A for the related accounting-policy election.