By annually compounded I presume you mean that interest is only added to the loan on an annual basis, so if this were a 2 year loan of 100 then EOY1 interest is 10 so SOY2 balance is 110 and EOY2 balance is 121

[EOY is end of year, SOY is Start of year]

However, from an accounting perspective, using the accruals concept, the bank must accrue the interest on what basis?

Therein lies the answer to your question.