What is Accrued Interest?

Legal Definition
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 financial instrument such as a bond, interest is calculated and paid in set intervals (for instance annually or semi-annually). Ownership of bonds/loans can be transferred between different investors not just when coupons are paid, but at any time in-between coupons. Accrued interest addresses the problem regarding the ownership of the next coupon if the bond is sold in the period between coupons: Only the current owner can receive the coupon payment, but the investor who sold the bond 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.
-- Wikipedia
Legal Definition
The interest on a BOND or LOAN that has been earned but not yet paid. Interest payable/receivable accumulates between COUPON payment periods; once a periodic interest payment is made, accrued interest reverts to zero and begins building on a daily basis until the next payment. Accrued interest of a FIXED INCOME instrument can be computed via: where C is the coupon, AD is the actual number of days that have elapsed since the last coupon, and n is number of days in the coupon period. See also CLEAN PRICE, DIRTY PRICE.ACCUMULATED DIVIDEND A DIVIDEND that has been declared, but not yet paid, to investors holding CUMULATIVE PREFERRED STOCK. No dividends are payable to holders of COMMON STOCK until accumulated dividends have been paid. Since accumulated dividends are contractually owed to investors, they are reflected as a LIABILITY on the issuer