calculation of fixed deposit

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Sameer Arora (Querist)
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08 September 2009 please explain me how to calculate fd interest on non-cumulative and cumulative fixed deposit. please explain accrued interest concept with journal entries and what will be the accounting treatment in current year and in the next year ? what will be the entry of accrued interest in the next year?

CA Binal Shah

CA Binal Shah (Expert)
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09 September 2009 Hi,
1) Calculation of int on non-cumulativa FD:
Its very simple,just calculate simple int for the period e.g. FD of 10,000/- @ 8% p.a. ,int to be recd monthly then int=(10,000*8%*1/12). This is for every month.

2) Calculation of int on Cumulative FD:
--U hv to calculate compound int..suppose in above example int is to be recd at the end of the period,cumulatively then for e.g.FD period is 1 year and int term is quarterly-cumulative then

int=(10,000*8%*3/12)for 1st qua i.e200/- now in 2nd qua int wil be calculated on (10,000+200) and so on....

3) Accumulated interest:
This is the interest which is due but not recd during the year. Suppose in above exa. u hv made FD on 15th mar,09 for 1yr,with non-cumulative int to be recd every month. Now ur 1st month int wil be recd on 15th april.but ur a/c wil end on 31st mar. It mean that 15days int(i.e. from 15thmar to 31st mar)is the income of the year ending on 31stmar 09 and remaining 15day int is income of yr 1-4-09 to 31-03-10. now u hv to make provision for accumulated int as follows:

first of all calculate int for the current yr,i.e. in our exa from 15-03-09 to 31-03-09. It is 10,000*8%*15/365=33/-

Journal Entry:
31-03-09
1) Accumulated int dr. 33
To FD interest 33
(Being prov for accumulated int on FD no...)
15-04-09
On this day u wil get int for 1mth i.e. 10,000*8%*1/12=66/-
1) Bank a/c dr.66
To Accumulated int 33
To FD int 33
(Being FD int recd.)

Hope u r cleared.

Message likes : 2 times

CA Binal Shah

CA Binal Shah (Expert)
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09 September 2009 if still not cleared,send me ur mail id,i'll send u file for int calculation..

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