How will the accounting record of interest income be?
Example of interest income and withholding tax calculation and journal entry:
1) Data
- Principal: 1,000,000 TL
- Annual Interest Rate: 50%
- Term: 32 Days
- Withholding Tax Rate: 7.5%
2) Interest calculation formula:
Principal x Term x Interest Rate / 36500
1,000,000 TL x 32 Days x 50% / 36500
- Gross interest amount: 43,835.62 TL
- Withholding tax: 3,287.67 TL
- Net Interest Income: 40,547.95 TL
3) Example of journal entries
1_________________________ / _________________________
102 BANKS 43,835.62 TL
642 INTEREST INCOME 43,835.62 TL
Explanation: Interest income
2_________________________ / _________________________
193 PREPAID TAXES AND FUNDS 3,287.67 TL
102 BANKS 3,287.67 TL
Explanation: Withholding tax deduction on interest income
_________________________ / _________________________
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