What accrued interest is doing in your net liquidation value

Photo: Callum Mullin / Unsplash

Open your brokerage account and the headline figure is usually net liquidation value: what your account is theoretically worth if you liquidated everything right now. Most people read it as "my money." It's close, but tucked inside that number is a category that behaves differently from everything else: accruals.

Earned but not yet paid

Some income accumulates continuously but only lands in your account on specific dates. Two common examples:

• Accrued interest. Cash balances, bonds, and money-market positions earn interest every day, but it's typically credited monthly. Between credit dates, the interest you've earned but haven't been paid sits as an accrual.
• Accrued dividends. Once a stock goes ex-dividend, you're entitled to the payment, but the cash doesn't arrive until the pay-date weeks later. In between, the amount owed to you is an accrual.

Your broker folds these accruals into net liquidation value because, economically, they're yours. You earned them. That's the right accounting. Leaving them out would understate what your account is really worth.

Why it can trip you up

The catch is that an accrual is not spendable cash and not a tradeable position. It's a receivable, a promise of money on a future date. That creates a few subtle effects worth knowing:

• Your cash balance and your NLV won't tie out by the amount of the accruals, and that's correct, not an error.
• NLV can tick up with no price movement at all. On a flat market day, accrued interest still grows, nudging your total value upward. If you're eyeballing daily changes, that small drift is accrual, not performance.
• When the payment finally lands, NLV doesn't jump. The accrual simply converts into cash. The value was already counted; pay-day is a reclassification, not a gain. People sometimes double-count here, seeing the cash arrive and thinking they're suddenly richer, when the money was in the NLV all along.

For performance measurement this matters. A correct return calculation counts income when it's earned (accrued), not when it's paid, otherwise your returns would lurch around pay-dates for no economic reason. Handled properly, accruals make your equity curve smoother and truer.

What Cresori does

Cresori accounts for accrued interest and accrued dividends the way your broker does, so its net liquidation value matches what you see in your account rather than drifting from it. More importantly, it recognizes income on an accrual basis in the performance engine, so a dividend contributes to your return the day you become entitled to it, not the day the cash happens to clear. That keeps your equity curve honest and stops pay-dates from creating phantom bumps in your time-weighted return.