Fixed deposit related query

Originally posted by : shilpa
	Please guidel me what are the accounting entries for Fixed deposit on accrual basis with TDS effect??? What if interest received periodically and if F.D is prematured??

1) At the time to making fixed deposit

FD with XYZ Bank A/c……………………..Dr

To Bank A/c

2) For Accrual of Interest

FD Accrued Interest……………Dr……..90

TDS on FD Interest……………..Dr……..10

To Interest on FD……………………………………..……100

3) If interest received periodically (suppose the periodical interest is being credited in your bank account)

Bank A/c…………….Dr

To Interest on FD

For TDS on FD interest, check your tax deduction statement (i.e. 26AS) or quarterly TDS certificate issued by bank.

TDS on FD Interest………….Dr

To Interest on FD

4) If fixed deposit is prematured, some banks charge penal interest for premature closure and interest will be paid for the period accordingly.

Suppose, originally you invested Rs. 100 for 1 year and maturity amount is Rs. 110 and after few months you made a premature withdrawal and bank charged penal interest of Rs. 5 and paid you Rs. 103.

Bank A/c…………..Dr………….103

Penal Interest…..Dr……......…….. 5

To FD with XYZ Bank A/c…………………..100

To Interest on FD……………………………….3

To Bank A/c……………………………...….…5