Hi guys. I am seeking some assistance in how to categorise/account for withholding tax. Here’s the scenario;
I have recently decided to invest (personal) in a money market fund whereby amounts I deposit earn interest at varying rates each day/month.
The interest earned is viewed by the government as income/revenue and as such attracts a 15% charge, which is paid as a final tax by the money market fund managers/company.
So if I paid 1,000 and it earned 100 as interest, the resulting balance would be 1,085 as opposed to 1,100.
I would like, if possible, to know how to go about recording this kind of a transaction to reflect all the parts. Key questions are as follows:
How do I record the interest received on the principal?
How do I record the tax deducted on the interest earned from the principal?
Presently this is what I have done to capture part of the transaction:
Created an asset account titled Emergency Fund - MMF
Made a payment of the initial deposit to the Emergency Fund which deducted my bank balance, but is at the same time equalised under assets/equity.
I hope I have made sense. Please render your assistance. Thank you in advance.