Think of compound interest like a snowball rolling down a hill; as it gathers more snow, it grows faster and larger with every turn.

The total amount after $n$ years under annual compounding is given by the formula $A = P(1 + \frac{R}{100})^n$. Subtracting the initial principal $P$ from the final amount $A$ gives the compound interest ($CI = A - P$).

Always distinguish between simple interest and compound interest in competitive exams to avoid calculating the wrong interest type.