Go AD-Free with CAclubindia Pro and get a FREE CCI Coffee Mug. Subscribe Now!

Accounting for accrued interest

CA M.Prabakaran (Manager - F&A) (81 Points)

08 June 2012

A company has given Inter Company Loan to its newly acquired company on 9th march 2012 of RS.100,00,000/- at 12% rate of interest.The parent company accounts as per AS 7.I do want to know whether there we should pass any provision for accrued interest with regard to that 21days for interest.

Reply
Follow
Share

7 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 08 June 2012

If the parent co. has taken the loan, then it shall pass an entry in its books to provide the Interet payable on the loan @ 12%.

But if the Parent co. is receiving any interest on such loan, then it shall book such interest only when it receives it.

Regards,

Devendra Kulkarni

Upgrade to CAclubindia Pro. Subscribe Now!

CA Ganesh Agarwala (Audit Senior Manager) (239 Points)
Replied 08 June 2012

dear prabhakarn,

i think yes you need to make provision for the accrued interest otherwise it will violate the fundamental accounting assumption.

cheers

ganesh agarwala

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 08 June 2012

Originally posted by : Ganesh Agarwala
	dear prabhakarn, i think yes you need to make provision for the accrued interest otherwise it will violate the fundamental accounting assumption. cheers ganesh agarwala

kumar gaurav (article) (28 Points)
Replied 08 June 2012

Dear Prabakaran, Both the companies will make provision entry for intrest accrued.

Ajit Y. Bhobe (Accounts Executive) (26 Points)
Replied 09 June 2012

In current f.y. 2012-13 Interest received and credited to bank amounts to Rs. 13500 ( Where interest amounts to Rs. 15000 less 1500 tds)

Of this amount of Rs. 15000. interest accured is Rs. 10,000 less tds 1000 net 9000 ( Rs. 9000 interest is of previous year 2011-12

So entry in previous year where interest is added to FDR

FDR A/c Debit Rs. 9000

TDS on FDR Interest Debit. Rs. 1000

Interest on FDR Credit Rs. 10000

What will be the entry in current year

Should I have to credit the entire 13500 to interest Account

TDS on FDR interest Debit 500

Bank A/c 13,500

Interest on FDR ( 9000 Net interest of previous year +5000) credit Rs. 14000

Please advice if it is correct

Ajit Bhobe

Upgrade to CAclubindia Pro. Subscribe Now!

CA Jaspreet Singh Sidana (Chartered Accountant) (45 Points)
Replied 10 June 2012

Dear Ajit, accordin to me u shud pass the followin entry:

Bank a/c dr - 13500

TDS dr- 500

To Interest on fdr - 5000

To Interest accrued a/c- 9000.

Explainition: since you had passed an entry for accrued interest in the previous yr ..the same shall b reversed in the current year as the amount has been recieved.and balance Rs 5000 is of current yr and shall b credited to profit and loss account as current yr income.

regards,JASPREET