Journal Entry for Fixed Deposit and entry in tally

Fixed Deposit is an asset for a firm its provide fixed rate of interest until a given maturity period.Fixed
deposit can be current asset or non current asset depending upon the duration of its maturity.

Example of Accrued Interest

Example A ltd has invested Rs 150000 form his saving bank account for fixed deposit after maturity he
received with interest Rs 165,000 .Then he request bank to make the Fixed deposit again excluding
the interest amount

.In the above case we have to open an account Fixed Deposit which is an asset for the company.

Therefore first entry will be

Fixed Deposit A/c Dr 150000

To Bank A/c 150000

When payment of Fixed deposit is received in bank

Bank A/c Dr 165000

To FD A/c 150000

To Interest on FD A/c 15000

(being interest on FD received)
when FD is renewed with the amount excluding the interest amount.
FD A/c Dr 150000

To bank 150000

(being money deposited in FD)

Now here FD is asset for the business therefore it will be shown in the balance sheet. and interest on
FD is an income for a business therefore will be shown in the profit and loss account in final accounts.

2) Suppose Mr x invested Rs 100000 in the bank for 3 years and interest on FD @ Rs 10000 p.a.We
have to pass the journal entry till maturity of the Fixed deposit

In the following case Fixed deposit is an asset and to increase over asset we have to debit
it.
therefore entry will be

first Year
Fixed Deposit A/c Dr 100000

To Bank a/c 100000

(being fixed deposit in the bank have been made)

Interest on FD is income earned but not received therefore it is accrued interest which is
an current asset and therefore to increase asset we have to debit it.First year
Accrued Interest A/c 10,000

To Interest A/c 10,000

(being interest on FD is accrued)

Second year
Accrued Interest A/c 10,000

To Interest A/c 10,000

(being interest on FD is accrued)

Third year
Accrued Interest A/c 10,000

To Interest A/c 10,000

(being interest on FD is accrued)

Entry on date of maturity of Fixed deposit

Bank A/c Dr 130,000
To Fixed Deposit Accounts 100000

To Accrued Interest A/c 30,000

(Being Fd matured and amount received)

Fixed deposit entry in tally erp

Example : Company Invested Rs 100000 for 3 years in bank for the period of 3 years and interest
earned @ 10% p.a.

therefore following accounts to be maintained under tally

Step to be followed to go gateway of tally and under Accounting info > create ledger

Name of accounts Under Inventory value are affected

Fixed deposit Deposit (asset) No

HDFC Bank Bank —–

Fixed deposit comes under which head in Tally answer is Deposits (assets)

After creating following ledger create journal entry

Fixed deposit a/c Dr 10,00000

To HDFC bank a/c 10,00000

(being FD deposited in HDFC bank)

now to pass following journal entry in tally

Go to gateway of tally > accounting voucher > F5 payment and Dr Fixed deposit and credit HDFC
bank.

Example of security deposit

Mr x deposited Rs 100000 as security deposit for renting a building and rent for the building is
decided Rs 10,000 each year.

It is common practice that owner of building ask for security deposit and in the above transaction
security deposit to owner of building is an asset for us therefore journal entry will be following

Security deposit for rent A/c Dr 100000

To cash A/c 100000

(being security deposit of the building is paid )

when rent of the building is paid Rs 10,000.

Rent A/c Dr 10,000

To cash A/c 10,000

(being rent of the building is paid)

now when the contract of renting a building is terminated and security deposit is received back.

Cash A/c dr 100000

To Security deposits of rent A/c 100000

(being security deposits received back)

Journal entry of Fixed deposit With TDS

TDS is income paid the bank to the government of India on our behalf form the interest earned by us
which is defined under income tax law section 194.

The interest paid by the bank is liable to pay TDS @ 10%.

Example :

A ltd make an FD with the bank for 3 years Rs 100000 and interest receivable is Rs 10% per annual.

Journal entry for the first year will be :

Fixed deposit A/C Dr 9000

TDS receivable A/C Dr 1000

To Interest received A/C 10000

Journal entry for the secound year will be :

Fixed deposit A/C Dr 9000

TDS receivable A/C Dr 1000

To Interest received A/C 10000

on maturity

to

TDS receivable is amount deducted by bank as per Income tax rules under section 194, and it is
treated as asset in the books. It is shown under current asset on asset side of balance sheet.
As per Real account rule (TDS receivable) “debit what comes into business”(Current Asset)
Journal entry of fixed deposit
When fixed deposit is made with the bank for 3 year Fixed a/c Dr
To Bank A/c
When interest is accrued at the end of 1 accounting year Accrued interest of Fixed deposit A/c Dr.
To interest on fixed year

When interest is accrued at the end of 1 accounting year Accrued interest of Fixed deposit A/c Dr.
To interest on fixed year

When interest is accrued at the end of 3 accounting year Accrued interest of Fixed deposit A/c Dr.
To interest on fixed year

Adjustment of accrued interest and received fixed deposit

Amount in bank Bank A./c Dr
To fixed Deposit A/c
To Accrued Interest of fixed deposit a/c

Note here when in

Journal entry of fixed deposit

Fixed a/c Dr
When fixed deposit is made with the bank for 3 year
To Bank A/c

Accrued interest of Fixed deposit A/c

Dr.

When interest is accrued at the end of 1 accounting year To interest on fixed year

Accrued interest of Fixed deposit A/c

Dr.

When interest is accrued at the end of 1 accounting year To interest on fixed year

Accrued interest of Fixed deposit A/c

Dr.

When interest is accrued at the end of 3 accounting year To interest on fixed year
 Bank A./c Dr
Adjustment of accrued interest and received fixed
deposit
To fixed Deposit A/c

Amount in bank
To Accrued Interest of fixed deposit a/c