Accrued interest is always classified as which type of asset?

• A. A current asset
• B. A non-current asset
• C. A fixed asset
• D. An intangible asset

Answer: (A)

Accrued interest is interest earned on investments or loans that hasn’t been received yet. Because it represents money owed to you that you expect to collect in the near term, it is recorded as an asset on the balance sheet. Since most accrued interest is expected to be collected within the next year (or the operating cycle), it is classified as a current asset. It isn’t a fixed asset, which are long-term physical resources, nor an intangible asset, which are long-term non-physical assets. It would only be non-current if the collection were anticipated to occur beyond a year. For example, interest that has accrued on a bond you own but haven’t been paid yet sits as interest receivable, a current asset, until the cash is received.