Question

if interest on investment given in adjustment .how to record in p/l a/c and balance sheet​

Answer 1

ANSWER :

• ❖ If interest on investment is given in adjustment; it will be recorded in the Credit side of the Profit and Loss Account and Assets side of the Balance Sheet.

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EXPLANATION :

When there is investment, usually interest is provided at certain rate. Investment is an asset and the interest on investment is a revenue or income.

$\: \: \: \: \: \: \: \: \: \:$ The interest on investment is given in the adjustment; then while preparing Final Accounts, it will be recorded in two places i.e., in the Profit and Loss Account and in the Balance Sheet.

• ⊚ Treatment in the Profit and Loss Account : The amount of interest on investment will be shown in the Credit side of Profit and Loss Account as Interest on Investment. However, if any amount of interest on investment is accrued, then it will be added to the paid amount of interest on investment in the Credit side of the Profit and Loss Account.

• ⊚ Treatment in the Balance Sheet : The amount of interest on investment will be shown in the Assets side of the Balance Sheet.