Journal Entry and Ledger Posting for Accrued Interest on Bank Fixed Deposits

Accrued Interest on Fixed Deposit Account means, Interest on Fixed Deposit Account earned but not yet received by the Depositor/Account Holder/Customer of a Bank.

Interest earned is added to the Principal Amount of Fixed Deposit Account.

On the maturity/close of Fixed Deposit Account, Principal amount along with total Interest earned is received.

Now let's discuss how to pass necessary Journal Entry and post them into their respective Ledger Account, when Interest on Fixed Deposit Account is accrued.

When Interest on Fixed Deposit is accrued, the affected Ledger Accounts are :

Fixed Deposit Account shows Debit effect and,

Interest on Fixed Deposit Account shows Credit effect.

Journal Entry

Ledger Posting

In Fixed Deposit Ledger Account.

In Interest on Fixed Deposit Account

Example :

M/s.Aman Jewellery opened a Fixed Deposit Account on dated 01/08/2021 with Bank of India for ₹2,00,000/- @ 6% Interest p.a. Date of Maturity dt.31/07/2023. Interest accrued as on dt.31/03/2022 is ₹8,000/-.

Pass necessary Journal Entry and post them into their respective Ledger Account for Interest accrued.

For the above transaction,

Debit Ledger is :

• FD with Bank of India A/c

Credit Ledger is :

• Interest on FD with BOI A/c

Journal Entry

Ledger Posting

In Fixed Deposit with Bank of India Ledger Account.

In Interest on FD with BOI Ledger Account