In accounting, arrears refer to a liability or an obligation that has not been settled by its due date. This can apply to various financial scenarios such as unpaid dividends, interest, salaries, or rent.
The term 'in arrears' refers to the status of payments that are overdue. In financial terms, it commonly indicates that the last payment was made at the end of a period rather than in advance. It can also mean that payments are in default, indicating non-compliance with the agreed payment schedule.
A nonperforming asset (NPA) is a classification used by financial institutions for loans or advances that are in default or are in arrears on scheduled payments of principal or interest. These assets are not effectual in producing income and thus pose a risk to the financial health of lending institutions.
