26 Annex 3 (Vide para 4.5.3(iii)) Illustrative Accounting Entries to be passed in respect of Accrued Interest… — THE RESERVE BANK OF INDIA ACT, 1934

26 Annex 3 (Vide para 4.5.3(iii)) Illustrative Accounting Entries to be passed in respect of Accrued Interest on both the Performing and Non - performing Advances I. Accrued Interest on Performing Advances i) It has been clarified in paragraph 4.5.2 and 4.5.3 (ii) of the Master Circular that accrued interest in respect of performing advances may be charged to borrowal accounts and taken to income account. Illustratively, if the accrued interest is ₹10,000/- in respect of performing advances of a borrower 'X' (cash credit, overdraft, loan account, etc.) the following entries can be passed in the Books of Account. (Dr) Borrower's account (CC, OD loan) ₹10,000.00 (Cr) Interest account ₹10,000.00 (Dr) Borrower's account (CC, OD loan) ₹10,000.00 (Cr) Interest account ₹10,000.00 ii) In case the accrued interest of ₹10,000/- in respect of the borrowal account is not actually realised and the account has become NPA, interest accrued and credited to income account should be reversed or provided for if the same is not realised by passing the following entries : (Dr) P&La/c) ₹10,000.00 (Cr) Overdue Interest Reserve Account ₹10,000.00 (Dr) P&La/c) ₹10,000.00 (Cr) Overdue Interest Reserve Account ₹10,000.00 iii) In case accrued interest is realised subsequently, the following entries may be passed: (Dr) Cash / Bank account ₹10,000.00 (Cr) Borrower's Account (CC, OD, Loan) ₹10,000.00 (Dr) Overdue Interest Reserve Account ₹10,000.00 (Cr) Interest account ₹10,000.00 (Dr) Cash / Bank account ₹10,000.00 (Cr) Borrower's Account (CC, OD, Loan) ₹10,000.00 (Dr) Overdue Interest Reserve Account ₹10,000.00 (Cr) Interest account ₹10,000.00 II. Accrued Interest on Non - Performing Advances i) Accrued interest in respect of non-performing advances may be debited to 'Interest Receivable Account' a