Accounting for accrued 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

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