04 January 2011
As per AS 9, interest income is recognised on time proportion basis. Suppose if the Fixed Deposit taken by the company is 1 crore @10% payable quarterly(interest accumulated quarterly, and then on principal amount + interest the next quarter interest is calculated), then, how will the interest be recognised? Summary: FD principal amount:1Crore Rate of Interest : 10% Frequency of payment: Quarterly Period of FD: 2 Years Maturity Value: 12184030 Total Interest: 2184030
Option 1: Interest to be recognised for the year: 2184030/2
Option 2: Interest to be recognised when the interest amount is actually due... Quarter basis.. In the present case, Rs. 250000+256250+262656+269223= 1038129
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