Accounting for accrued interest

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.

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

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

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

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

 

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

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

agree with jaspreet