28 February 2011
FDR interest is taxable and should be accounted on accrual basis. It can be calculated on the basis of rate given in the FD receipt or you can take an annual accrual certificate from your bank. It should be accounted for as follows:
Interest Accrued(FDR) a/c Dr Interest earned on FDR Cr
Interest Accrued(FDR) will be a Balance Sheet item, whereas Interest earned on FDR will be a Income side item of P&L a/c.
When you actually receive the interest from bank, then it should be credited to Interest Accrued(FDR) a/c.