When preparing a balance sheet and other accompanying statements, it is frequently proper to show thereon items for interest accrued but not due, in order to arrive at the actual condition of the business on the date of the balance sheet. This accrued interest is the amount which has accrued on each item since the last entry of overdue interest.

While the amount should be calculated accurately, and not merely estimated, it is not always advisable to enter it on the books, as any such entry may lead to complications in the following year, for the reason that the numerous items of accrued interest fall due at different periods and it is necessary to determine each month (for possibly the eleven months following the balance sheet) the amount which has become due, and this amount is to be credited to interest accrued instead of to interest overdue.

This is one reason why many real estate concerns have found it best not to take into the balance sheet interest accrued but not due. The consequent inaccuracies are reduced in amount if interest is made payable quarterly, and also if the last day of the fiscal year be selected as one of the regular dates for calculating interest, as suggested in Section 138.