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How do I enter accrued interest and TDS of my FD in accounts ?

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  • How do I enter accrued interest and TDS of my FD in accounts ?

    Here is the example of FD maturing in one year, on 08-May-17, with the accrued interest up to 31-Mar-17 as 9,000 and total interest earned up to 08-May-17 as 10,000.

    1. Add FD entry from PMS. From the summary screen double click on FD.

    2. Select the Transaction Type as Investment. To add the FD name click on New.

    3. Enter the FD name and Reference number and click on OK.

    4. Enter all the required details and Save it.

    5. Go to Accounts & click on New ledger.

    6. Enter the ledger name as Accrued Interest and select the group Current Assets. Click on Add.

    7. Click on Journal voucher from the left panel - Voucher Types.

    8. Make a Journal entry on 31st March : Accrued Interest - debit 9000 to Interest on Investment - credit 9000 and save it.

    9. Select Transaction type as Add - Interest / Withdrawal button.
    Select the Transaction type as 'Withdrawal and make a withdrawal entry of Principal Rs.1,10,000/-. and save it.

    10. Now make a JV entry - Reverse Accrued Interest entry -
    Interest on investment - debit Rs. 9000/- to Accrued Interest credit - Rs. 9000/-

    MProfit Support
    Last edited by MProfit Support; 28-11-18, 11:07 AM.

  • #2
    MProfit Support team,

    Thanks for this post !

    I have been using "Interest (cumulative)" option in PMS to add accrued Interest for FD's. These also get included in "Interest on Investment" ledger. Should I change my approach or is that correct?

    I think I will still need to complete step 8 - 10 in order ensure that I handle the accrual correctly till maturity. Right?

    Can you share about when to use Interest (cumulative) or Interest Payout for FD's in PMS module please?



    • Tanmay Keni
      Tanmay Keni
      Super Moderator
      Tanmay Keni commented
      Editing a comment
      Dear Janakiraman M,

      Accrued interest is actually an accounting JV to be added to compute your tax liability on the accrued interest income.

      You will have to reverse this entry when there is an actual Interest pay-out in the next financial year

      Please follow the same steps mentioned in the post. It has been explained with actual example for both the entries.

  • #3
    A follow up on this - TDS deducted on the accrued interest and during final withdrawal is not mentioned in the above illustration. In the example illustrated, if a TDS of 900/- was deducted from the accrued interest on 31/03/2017, and a TDS of 100/- is deducted during the final withdrawal on 8th May 2017, how should the ledgers factor the TDS amounts and adjust the accumulated interests?