# What is the capitalization of interest, you need to know each

What is the capitalization of interest, most likely,not all inhabitants of our country know. Nevertheless, this is an important concept on which the final amount of the income from the deposit in the bank depends. In its essence, capitalization is an analogue of a compound interest, which, in turn, represents the accrual of interest on already accrued interest on the deposit.

For example, a legal entity or an individualplaced the money in a contribution to a credit institution in the amount of 100 000 rubles at 10% per annum. In the event that interest is accrued once at the end of the year, then the depositor will receive 110,000 rubles back.

If they are accrued on a monthly basis, and on them, inin turn, interest is accrued in the same amount (10%), then the amount that appears on the account by the end of the year will be: 100 000 rubles. (the initial amount) x (1 + 0.1 (stake size in shares) 12 (the number of charging periods) to the power of 12 (the number of periods for which money is placed, 12 months) = 110 471.31 rubles. 471 rubles more.This is the capitalization of interest.The difference, of course, is small, but the larger the amount, and the more intermediate incomes are accrued, the greater the amount of the resulting gain.

But a deposit with a capitalization of interest is not alwaysunconditional order is more profitable than the same operation with interest accrued at the end of the period. Always pay attention to the interest rate, the contract conclusion period and the interest accrual period. For example, a contract with the calculation of simple interest at a rate of 12% per annum on the results of the year will be more profitable than a contract at a rate of 10% with compound interest accrued monthly during the year.

What is the capitalization of interest from positionsaccounting? If the organization has placed any amount in the deposit with interest payment, then it is considered among financial investments. Interest under the deposit agreement is accrued depending on its terms and conditions. At the same time from the point of view of accounting, it does not matter whether these percentages were received or not yet.

The contribution with a monthly interest capitalization ofthe amount of 100 000 rubles at a rate of 10 percent per annum will be reflected in the accounting as follows: Debit 58 accounts Credit 51 accounts for the principal amount (100 thousand rubles). After the end of the interest accrual period (monthly for 12 months), the debit of the 76th account and the credit of the account 91-1 reflect the fact of charging 100 000 x (1 + 0.1 12) to the power of 12 = 10 471.31 rubles. Then the return of funds from the deposit (original 100 thousand rubles) is reflected in the Debit of 51 accounts and the Credit of 76 accounts. And, finally, the interest already received (10,471, 31 rubles) is accounted for by the following accounting entries: 51 accounts are debited, 76 accounts are credited.

What is the capitalization of interest with the taxpoints of view? Here, if the enterprise keeps records of expenses and incomes in accordance with the accrual methodology, interest is reflected at the end of the corresponding reporting period (year), even in cases where deposit agreements are concluded for a longer period, for example, three years. This rule is established by 271 articles of the Tax Code in respect of loan agreements and other similar contracts.