[GNC] Working with compound interest on varying amounts

[Stephen M. Butler]

On 12/3/18 6:02 AM, Hal Vaughan wrote:
> So GnuCash doesn’t do this kind of thing?
>
> If it’s off by a cent or two, I can deal with it, but the problem is I use one credit line for multiple projects at a time, so I have to be able to easily work out the interest for each individual project.
>
> Hal

Not automatically.  Remember that you can enter formulas instead of 
values into the debit/credit fields.  However, even here the values you 
want to use are not represented by symbolic variables. That is, GNC has 
nothing to which the current balance of the account is assigned.  And, 
your interest rate varies along with the number of days between 
transactions.  However, you could enter the values and let GNC calculate 
the results.  You may have to enter extra transactions on the dates so 
you can pick up the new balance to use for the next transaction date.  
In general, the interest amount to add to the outstanding balance is:  
old-balance * annual-interest-rate * #daysbetween / 360 (or 365 
depending on your bank.

January 1 - withdraw $50,000 from zero balance giving a loan balance of 
$50,000

January 15 - calc interest @3% for 14 days -- $50,000 * .03 * 14 / 365  
(grab the value GNC calculates and put it on the Interest Expense for 
the project).  May need to round it up/down from $57.534246.  Lets call 
it $57.53

January 15 - withdraw another $10,000 giving new balance of $60,057.53

January 31 - cal additional interest for past 16 days: $60,057.53 * .03 
* 16 / 365 = =$78.979765479 (round it up to $78.98).

This will get more complicated if the $50,000 was for the purchase of 
one house but the $10,000 was for the roof of another house.

So, this will take more typing -- but GNC can do the calculations -- you 
just need to remember the formula.

As David indicated, it will be easier to take the values from the 
statement and enter them after the fact.  Again, more complicated if you 
have more than one project in a given month.

If your bank allows you to download the transactions as a QFX (or 
related) file, that would be the simplest.  Simply override which 
project gets the expense side of the transaction -- including the 
interest transactions.

--Steve

>> On Dec 3, 2018, at 7:03 AM, David T. <sunfish62 at yahoo.com> wrote:
>>
>> Hal,
>>
>> Most such calculations are devilishly difficult to represent with 100% accuracy, which is why I have always opted to base my transactions on the statement, rather than try to anticipate what the finance company is going to come up with.
>>
>> David T
>>
>>
>> On Mon, Dec 3, 2018 at 12:10, Hal Vaughan
>> <hal at hal.dance> wrote:
>> For the past few years, for my business that is mostly about renovating or restoring houses and reselling them (not flipping - this work takes time), I’ve used a Python library I wrote myself to handle accounting.  It was basically made up mostly of stuff I had, with a few new things added in.
>>
>> I would like to switch over to GnuCash.  Luckily, since I’m at a slow point and between projects, I can do that without worrying about converting old data for older LLCs and projects.
>>
>> There’s one issue I’m not sure can be handled by GnuCash, so I’d like to find out about it before trying to switch over.
>>
>> I use a line of credit.  Luckily the interest rate is basically constant.  (There’s a slight flux, but not much.)  The problem is its compounded and, of course, every time I withdraw money from the credit line or pay any back, the principal amount changes.  I’m hoping, at this point, people are saying, "Oh, yeah, just do this…."
>>
>> But just in case there’s a need for clarification, if I withdraw $50,000 to purchase a house on January 1, then, on the 15th, withdraw $10,000 for roofing work, need to figure out the total owed to that credit line on 1/31, and the interest rate is 3%, then I have to figure compound interest on $50,000 at 3% from 1/1 to 1/15.  Then I have to add $10,000 to that amount to calculate the interest on the $50,000 plus 15 days of interest, plus $10,000, plus the interest from the 15th to the 30th, at 3%, to get a clear number for what I owe.
>>
>> Can I have this done automatically on an account?  If not, how can I easily keep track of this in GnuCash?
>>
>>
>> Thank you!
>>
>>
>> Hal

-- 
Stephen M Butler, PMP, PSM
Stephen.M.Butler51 at gmail.com
kg7je at arrl.net
253-350-0166
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