Adjustment Applied to a Loan: Best Practices?

Dorel Ciornei dorelciornei at yahoo.com
Mon Jul 27 19:46:13 EDT 2015


Thank you Michael,That was my first thought.I just didn't know if it would create any issue recording the transaction to the Equity account with an effective date much later than the creation of the account itself (the date I imported the data in GNUCash).I like this because it keeps all other accounts unaffected.I can still change it at the end of the year if in the final statement I can see the reason for the credit.
Dorel



     On Monday, July 27, 2015 4:47 PM, Michael Hendry <hendry.michael at gmail.com> wrote:
   

 
> On 27 Jul 2015, at 19:30, Dorel Ciornei <dorelciornei at yahoo.com> wrote:
> 
> 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
> 

I’m not an accountant, and I live in the UK.

I would record the Adjustment as a reduction in the Liability for the Student Loan, and use Equity: Opening Balances as the source of this money, on the assumption that there was some miscalculation of the outstanding loan at time you started using GnuCash.

Without knowing precisely why the Adjustment was made (the organisation making the loan gave you an incorrect statement, or has discovered it has been charging you too much interest, for example), that’s where I’d leave it.

I would take the date on which the Adjustment was made in the lender’s statement as the effective date of this transaction.

I don’t think this should be classed as income, as it arises either because you didn’t really owe that much in the first place, or because you have overpaid in some way, but if the interest charges are tax deductible you will have to take this into account.

Hope this helps,

Michael



> 
> 
> 
>    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.
> 
> 
> 
> _______________________________________________
> 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.


  


More information about the gnucash-user mailing list