interest on fixed deposits

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CA Ashish Lodha (Querist)
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15 July 2011 can provision of interest income be made in accounts????
if interest is for current period
e.g if fixed deposit is created on 1-1-11 and current year is 10-11,and if f.d is going to be breaked in month of april next year what is accounting effect to be given as on 31-3-11???
there is no date fixed on which interest is going to be received.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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15 July 2011 On F.D banks generally calculate interest up to 31st March and the same is the case of Savings Bank Account. You are required to file the return by the end of 31st July in case of unaudited accounts and up to 30th September, In case you pre mature the FD in April then you can know how much interest is deducted and the same can be reduced from the interest calculated up to 31st March.

CA Ashish Lodha

CA Ashish Lodha (Querist)
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15 July 2011 thanks sir.
but my real doubt is that can we recognise income as on 31st march i.e can we create "provision for income" is it possible to create a provision for income as on 31st march for interest and pass entry as below

Provision for income a.c Dr
to Interest accrued a.c Cr ??????

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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15 July 2011 It depends on the method of accounting regularly followed by the depositor. For example,if mercantile system is being followed, necessarily, provison for interest has to be booked.
Since the interest has not become due in the example cited by you, the entry should be as follows:-

Interest accrued but not due a/c Dr Rs.xxx
To Interest on F.D Rs.xxx
(Being interest on f.d dated 1/1/2011
Provided upto 31/3/2011 @...%)