I am using product type 51A i.e. fixed term deposit.
There are two methods for Accrual/deferrals to calculate:
1. Reset Procedure: Which reverse the cumulative accrual next day.
2. Difference Procedure: This will not reverse the accrual entry next day but it will also calculate the accrual amount cumulatively.
For e.g;
FD: 100000 Rupees
Interest rate: 12%
Period: 01.01.2017 to 01.01.2018
Accural/Deferral Procedure for Fixed deposits
Accrual calculation and entries as per Reset procedure:
On 31st January 2017: Accrual entry
100000*1/12*12/100=1000
Entry would be :
Interest accrued but not due A/c Dr 1000
Interest Income on FD A/C CR 1000
On next day it would get reverse: i.e. on 01.02.2017
Interest Income on FD A/C CR 1000
Interest accrued but not due A/c Dr 1000
on 28.02.2017: Accrual Entry:
100000*2/12*12/100=2000
Entry would be :
Interest accrued but not due A/c Dr 2000
Interest Income on FD A/C CR 2000
On next day it would get reverse: i.e. on 01.03.2017
Interest Income on FD A/C CR 2000
Interest accrued but not due A/c Dr 2000
And so on.....
Accrual calculation and entries as per difference procedure:
On 31st January 2017:Accrual entry
100000*1/12*12/100=1000
Entry would be :
Interest accrued but not due A/c Dr 1000
Interest Income on FD A/C CR 1000
It would not reverse the entry on next day....
on 28.02.2017: Accrual Entry:
100000*2/12*12/100=2000
Entry would be:
Interest accrued but not due A/c Dr 2000
Interest Income on FD A/C CR 2000
This means in difference procedure also system calculates the Accrued Interest cumulatively; it’s just it does not reverse the entry next day.
In difference procedure there are various methods for calculation, like Linear and Pro rate which I have tried but its calculating the accrual cumulatively only.
So is there any possibility by which I cant post my accrual monthly only because system is calculating accrual amount cumulatively only in both scenarios i.e. in reset procedure and in difference procedure.
Kindly help on this, Need to go for soon implementation.
Kindly help on this above issue, Need to go for soon implementation.
Hi Srinivas, is your accounting entries are correct in both case ?
Interest accrued but not due A/c Dr 2000
Interest Income on FD A/C CR 2000
On next day it would get reverse: i.e. on 01.03.2017
Interest Income on FD A/C CR 2000
Interest accrued but not due A/c Dr 2000
Thanks for response rajen.
I don't want to reverse next day...as per client requirement we need to show them only for month ends.
For example: month end on 01/31/2017 and next reflect accrual date is 28/02/2017 only and there is no reset procedure.
please assist on this.
Thanks
Srinivas