Interest on loan payment entry

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2014 X Company Interest Paid Every month 1 Day X Company books in entry Provision or direct Payment Problem Solve

Amol S Joglekar

Amol S Joglekar (Expert)

23 December 2014 It is always better to create a provision entry and then pay the interest. It is good for control purpose
01.
Debit Interest A/c
Credit Interest Payable.
02
Debit Interest Payable
Credit Bank
Credit TDS deducted(If any)
03.
Debit Tds Deducted
Credit Bank

CA Kumar Mukesh

CA Kumar Mukesh (Expert)

24 December 2014 Mr. Amol Ji rightly pointed out it should be first create provision then only release payments.

but entry suggested by Mr Amol Sir is incorrect, as per section 194A TDS need to be booked even at expenses booked under suspense account. The Entry should be

On Provisioning of expenses i.e last date of the month
Expenses A/c Dr.
to Expenses payable
to TDS payable A/c

On the 1st day of the month
Bank A/c dr
to bank/cash

on the payment to TDS
TDS payable
to Bank/cash

Rupesh Jain

Rupesh Jain (Expert)

24 December 2014 if intt are received on the date of due then no provision entry required only direct receipt entry you can make.
other wise you can make provision entry then received entry.

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