Short-term Investments

Short-term Investments holds fixed deposits, treasury bills and other placements that mature or will be sold within twelve months. Surplus cash from the season often goes into a three or six month fixed deposit at a bank rather than sitting idle, and the deposit certificate is the evidence for the balance. Interest earned goes to Interest Income, with the bank withholding TDS that lands in TDS Receivable, and on maturity the principal returns to the bank account by Payment Entry. The balance stays at the amount placed; it is not revalued. A deposit rolled over for more than a year should be moved to Investments at Amortised Cost so the Balance Sheet shows liquidity honestly.

Balance = Deposits placed - Deposits matured; Interest at maturity = Principal x Rate x Months / 12.

1. 01Go to Payments > Payment Entry > New, type Internal Transfer, from the bank to Short-term Investments.
2. 02Enter Rs 5,00,000 and Submit; the entry above posts for a six-month fixed deposit at 7 percent.
3. 03On maturity, post a Payment Entry Internal Transfer back to the bank for the principal.
4. 04Post the interest by Journal Entry: debit the bank for the net received, debit TDS Receivable, credit Interest Income.
5. 05Open the ledger from the chart and tick each balance against a deposit certificate.

Post by Payment Entry or Journal Entry when placed. Interest goes to Interest Income on maturity.

Dr Short-term Investments Rs 5,00,000, Cr Bank Account Rs 5,00,000 for a six-month fixed deposit at 7 percent.