What is accrued interest?
Accrued interest is interest that has been earned on a debt or asset but not yet paid or received. For convertible notes commonly used in startup fundraising, accrued interest is added to the principal balance and converts into equity at the next priced round along with the principal.
Tracking accrued interest is essential for accurate cap-table modelling, conversion mechanics and tax reporting. Standard convertible-note terms specify simple interest (typically 4–8% annually) accruing from the issuance date until conversion or maturity.