JOURNAL ENTRY FOR FIXED DEPOSIT( INCLUDING INTEREST AND MATURITY)

Journal Entry for Fixed Deposit

Fixed deposit Rs. 100000/- was deposited in SB BANK

                   Fixed Deposit A/C             Dr      100000

                             To SB BankA/C                                         100000  

(Being fixed deposit was done in SB)

Rules for passing Journal entry

Debit

Fixed deposits are treated as non-current asset or current asset is depended on maturity period, if maturity period is less than one year from the date of reporting it is treated as current asset or else treated as non-current asset.

As per Real account rule (Fixed Deposit) "debit what comes into business"(Asset)

Credit

There are is outflow of cash from business and it has to be decreased by crediting the bank account.

As per Real account rule (Bank) "Credit what goes out of business"(Asset)

Journal Entry for Interest on Fixed Deposit(1^st year)

Generally interest on fixed deposit will be received at the time of maturity. So, the interest will be added to the fixed deposit account. Ex-Interest at the rate of 10% p a with 18 months maturity period.

        

                             Fixed deposit A/C             Dr      9000

                             TDS receivable A/C           Dr      1000

                                      To Interest received A/C              10000

(Being interest received on fixed deposit was recognized)

Rules for passing Journal entry

Debit

The interest received on fixed deposit or time deposit is added to fixed deposit Account which lead to increase in fixed asset .

As per Real account rule (Fixed Deposit) "debit what comes into business"(Asset).

Credit

TDS receivable is amount deducted by bank as per Income tax rules under section 194, and it is treated as asset in the books. It is shown under current asset on asset side of balance sheet.

As per Real account rule (TDS receivable) "debit what comes into business"(Current Asset)

The interest paid by bank are liable to deduct TDS at the rate of 10%.The interest is Rs. 10000(100000*10%),TDS is Rs.1000(10000*10%).

Credit

As per accrual concept interest income even though not received in cash but accrued(outstanding) in same year should be treated as income.

As per Nominal account rule (Interest received) "Credit all income or gains"(Revenue account)

Journal Entry for Interest on Fixed Deposit(2^nd half year)

         

                             Fixed deposit A/C             Dr      4500

                             TDS receivable A/C           Dr        500

                                      To Interest received A/C              5000

(Being interest received on fixed deposit was recognized)

Rules for passing Journal entry

Debit

The interest received on fixed deposit or time deposit is added to fixed deposit Account which lead to increase in fixed asset .

As per Real account rule (Fixed Deposit) "debit what comes into business"(Asset).

Credit

TDS receivable is amount deducted by bank as per Income tax rules under section 194, and it is treated as asset in the books. It is shown under current asset on asset side of balance sheet.

As per Real account rule (TDS receivable) "debit what comes into business"(Current Asset)

The interest paid by bank are liable to deduct TDS at the rate of 10%.The interest is Rs. 5000(100000*10%*6m/12m),TDS is Rs.500(5000*10%).

Credit

As per accrual concept interest income even though not received in cash but accrued(outstanding) in same year should be treated as income.

As per Nominal account rule (Interest received) "Credit all income or gains"(Revenue account)

Journal Entry for maturity of fixed deposit

                    

                   Bank A/C     Dr             113500 (100000+9000+4500)

                           To Fixed Deposit A/C                            113500

(Being Fixed deposit matured)

Rules for passing Journal entry

Debit

At fixed deposit maturity we will receive amount which includes interest after deduction of TDS. So, As per Real account rule (Bank) "Debit what comes into business "(Asset)

The maturity value is initial deposit amount plus interest after deduction of TDS @10%.So, in the above case initial deposit amount is Rs.100000/- Interest for first year after deduction of TDS is Rs.9000/- in second year(2^nd) it is Rs.4500/-

The maturity amount is=100000+9000+4500=113500/-

Credit

Debit balance sitting in the fixed deposit will be cancelled by crediting the account at the time of maturity. So, As per Real account rule (Fixed Deposit) "Credit what goes out of business "(Asset)