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Book Entries and Adjustment of Interest

The reports on interest amounts calculated in different ways give the interest implications, but these have not been brought into books. The same can be booked using debit or credit note with voucher class. Use Debit Note for interest receivables and Credit Note for interest payable. Interest is calculated on Simple or Compound basis and separate classes should be used for these.

To create voucher class for booking interest receivable

1.    Go to Gateway of Tally > Accounts Info > Voucher Types > Alter

2.    Enter the name of the class in the field Name of Class field.

3.    Enable the option Use Class for Interest Accounting.


4.    Press Ctrl+A to save Voucher Type Class.

5.    Press Ctrl+A to save Voucher Type Alteration.

Similarly, create a voucher class Compound Interest and set Amounts to be treated as Compound Interest to Yes.

Create a ledger Interest Received under the group Indirect Income for booking the interest value.

Voucher Entry for booking Interest

There are two situations for interest adjustments:-

     Simple Interest – Interest amounts are not debited onto the same bills. Create a fresh reference for it.

     Compound Interest – Amounts are auto-debited to the selected bills. Bill-wise details will not appear in this case.


     Interest on balances only

To create a voucher for booking the interest

1.    Go to Gateway of Tally > Accounting Voucher > Crtl+F9: Debit Note.

2.    Debit the Party ledger.

o     Select the bills to adjust from the List of Interest Bills in the Interest Details screen.

o     Press Enter.

3.    Select New Ref in the Bill-wise Details screen.

4.    Credit the ledger Interest Received grouped under Indirect Income.

 The Accounting Voucher Creation screen appears as shown below:

5.    Press Enter to save.

Entries for compound interest are exactly the same as simple interest where all you do is select the voucher class created for compound interest. Also the Bill-wise Details sub-screen is not displayed as the amounts are automatically added onto the bills.

The Ledger Outstandings appear as shown below:

The bill no. 113 is the invoice onto which interest has been compounded.

A new reference no 6 has been created for simple interest due from the party.