JOURNAL ENTRY FOR INTREST ACCRUED ON FD

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Guest

Guest (Querist)

16 July 2011 SIR,
i faced a problem in audit....one of our client has passed following journal .he has deposited 12lac for 3 years as fixed deposit with HDFC bank...at 31 st march he received intrest statement stating 50000 as intrest accrued on above and 5000being TDS deducted.total FD value being 12.5 lac..he passed following journal

TSD(receivable) 5000 Dr.
Intrestreceivable 45000 Dr.

To intrest accrued on FD(indirect income) 50,000

i found it right but my question is it will affect p/l a/c ...as i heard interest on fd must be capitalized in to FD balance in balance sheet.... if above entry how will it be capitalized????????

CA Ashwani Agarwal

CA Ashwani Agarwal (Expert)
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16 July 2011 The above entry can be capitalized by adding the accrued amount of interest i.e. Rs. 45000(which you have debited in interest receivable a/c) to the value of FD.

By doing this you have treated it as an income and also u have increased the amount of the FD.

Guest

Guest (Querist)

16 July 2011 sir, if i capitalized 45000 in fd a/c..then what is the entry of tds deducted of 5000...

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U S Sharma

U S Sharma (Expert)
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17 July 2011 TDR a/c dr ............45000
TDS a/c Dr .............5000
to Interest on TDR .........50000

being the amount received / credited to original TDR of 12L amounting to 1245000( 12L + 45000 interest) as on now after deducting TDS of 5000

CA Ashwani Agarwal

CA Ashwani Agarwal (Expert)
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17 July 2011 I think you want to ask that where you will show 5000 of TDS deducted. It will be shown in Balance Sheet as Current Assets.

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Guest

Guest (Querist)

17 July 2011 thank you...