I used to joke that since interest is calculated daily, wouldn’t the IRS computer burn out at 12:01 am…just based on attempting to calculate the client’s new balances? The concept of the assessed balance avoids this potential daily burn-out. All the IRS computer needs to remember is the benchmark of the assessed balance on each period. To calculate the “current balance”, a user accesses the database at any particular time and requests a balance. The computer pulls up the assessed balance, adds penalty and interest, subtracts payments and refunds and spits out the new current balance. These “new” calculations of added penalty and interest are called accrued penalty and accrued interest. In summary, the accrued balance or current balance is comprised of the assessed balance and the accrued P&I, less any credits.