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Accounting for treasury bills

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Querist : Anonymous

Querist : Anonymous (Querist)

06 October 2012 Bank purchases Government Treasury Bill having maturity of say 91 Days. The Purchase Price is say Rs. 99.50 and upon maturity the Bank will receive Rs. 100.

Now the Question is
1. Whether the difference amount shall be accounted for as Interest Income or Capital Gain?

2.In case the Bank sells the same before its maturity will there be any different treatment of the excess amount received over the Purchase Price?

3. Is there any RBI or ICAI Guideline for Accounting for Government Treasury Bills?

Kindly reply

Thanks in Advance

CA Sourabh Agarwal

CA Sourabh Agarwal (Expert)
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06 October 2012 Ideally it must be treated interest income for accounting purpose since this difference, in substance, is actually interest earned for an investor.

In case of sale, excess received should treated as profit for sale of investment.

Not sure, whether any such guidelines exist.

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