Adjustment Applied to a Loan: Best Practices?

[Dorel Ciornei]

Thank you Richard.I can see these scenarios and I understand your logic.Now, I also been paying student loans for a while and I know the bank would never make a mistake in my favor.:-)
On the bank statement just says "Adjustment".Since they always send an Year End Statement that shows how much principal and interest I paid (and the corresponding 1098-INT tax form) I will see how they treat this credit and make the proper decision at that time.Until then, I guess I will leave it as "Adjustment".
Thank you again.Dorel

 


     On Monday, July 27, 2015 12:27 PM, Richard Dawson <rcdawson at att.net> wrote:
   

 So, you were provided with a sum of money that you spent for education
expenses (including tuition, books, and beer).  Now you are paying it
back, with interest, so each period you reduce the principle and pay
some interest from your current assets.  Now, suddenly, either the
principle is reduced by $465 out of the generosity of the lender, or the
lender discovered that you overpaid interest and refunded the
overpayment by applying it to the principle, thus reducing it by $465. 
I suppose there are other scenarios that might apply.  An accounting
error that overstated the amount due....

My point is that it depends on what precipitated the principle
reduction.  If the lender has just decided to give you $465, then it is
income, and yes, you will probably have to pay tax on it.  Income>misc
might be the source.  If it is a refund of interest paid, then you would
take it back from the expense account in which you track the interest on
the loan.  If it was some sort of accounting error on the lender's part
and they were originally trying to collect more principle than they were
due, then an adjustment to the loan amount (presumably a liability
account) seems warranted, so I would take that adjustment from an
"adjustment" account which as I see it is a sort of fictional account
that can balance inexplicable additions and subtractions from real accounts.

Richard


On 07/27/2015 08:49 AM, gnucash-user-request at gnucash.org wrote:
> Hi all,I have an old student loan.On a recent statement I saw that I was given an adjustment of $465 (it reduced my total loan by that amount).
> Because of the double entry feature, I must chose an account where this money 'came' from:
> - Expenses:Education Expenses.Normally I think I should treat this as a 'credit' to the original Education Expenses that this loan paid.
> However, when I started tracking expenses in GNUCash, the loan was already a few years old, so after importing it just shows this loan starting with whatever Opening Balance was at that time, and I had no student expenses since that time. If I chose this, it would show that this year I spent minus $465 on education, which technically isn't true.
> - Expenses:Adjustment AccountThis is what I chose for now, but it just created a weird -465 total. In fact, any other expense account I chose it will have the same effect of reducing the expenses by this amount. 
>
> What do you guys suggest?
> What would be the best way to record this credit? Should I record it back to the Opening Balances Equity?That seems to be a good option, except that the transaction date is going to be 'today', not when the GNU Opening Balances were created.Would that be a problem?
> Thank you and I am sorry to take your time with simple questions that probably everyone but me knows the answer.
> :-)
> Dorel

_______________________________________________
gnucash-user mailing list
gnucash-user at gnucash.org
https://lists.gnucash.org/mailman/listinfo/gnucash-user
-----
Please remember to CC this list on all your replies.
You can do this by using Reply-To-List or Reply-All.