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(1st 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(2nd 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(2nd) 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)
What will be the accounting entry for interest accrued but not due on FD on 31st march?
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