Interest received from Inland Revenue on GST Refund

[MegC]

I have received a GST refund from Inland Revenue, which includes interest over and above the return amount, for paying early.  My problem is not with the original GST entry but when I enter the journal entry to clear GST collected and GST paid accounts for the return.  I enter the GST collected amount, the GST Paid amount and then the GST Payments/Refunds amount (which is what I actually received).  I am obviously left with the small amount of interest paid by IRD which needs a Credit transaction to balance the entry. 

My best thought is to enter a Credit to GST Payments & Refunds and memo it Interest Paid by IRD.

Would welcome any suggestions on how others have dealt with this?

[Murray_McKenzie · Accepted solution]

Hi Meg

Your interet should be credited to an income account - generally in the 8-xxxx, Other Income section, and specifically called Interest Received. If you put it to a GST account it will wrongly sit in the balance section when it is an income to the business.

Hope this helps

[MegC]

Thank you very much.  I have set up an 8-XXXX for Interest Received IRD.  I already have Interest Received accounts for the various bank accounts so this makes perfect sense.  Thanks again.

[MegC]

Oh ... should I also have entered the interest received separately on my original entry when I recorded the payment from Inland Revenue?