Accrued versus capitalised interest

Accrued interest is the amount earned by the lender over the days in a period, whether or not it has been added to principal. Capitalised interest is that amount at the moment it is added. On this page the two printed legs are the accrual, $3,934.07 + $7,409.40 = $11,343.47, and the closing drawn balance is the capitalisation: $1,847,220.00 + $11,343.47 = $1,858,563.47.

The legs were computed on a flat opening. There is no intra-month compounding on the page. Each day of the first eleven used $1,847,220.00, not $1,847,220.00 plus yesterday's slice. Capitalisation happens at period end, when the sum of the legs is folded into the close. If the $11,343.47 had been billed and paid, the close would have equalled the open. Draws and repayments are $0.00, so the entire lift is unpaid interest becoming new principal.

That new principal is the April opening. The next period's first day, if the rate is still 7.22%, accrues on $1,858,563.47 rather than on $1,847,220.00. One extra day's interest at that rate is $1,858,563.47 × 0.0722 ÷ 360 = $372.75, against $1,847,220.00 × 0.0722 ÷ 360 = $370.47 on the old principal — $2.28 a day of extra accrual from this month's capitalisation alone.

The statement therefore uses both words' facts without always using both words. “Interest charged” is the accrual. “Closing drawn balance” is the capitalisation. Confusing them produces a double-count: adding $11,343.47 to a close that already contains it, or treating the close as principal-only and missing that next month's base has already grown.