[GNC] Certificate of Deposit Early Withdrawal Penalty Account Entry

[Gyle McCollam]

Stephen,
I could be wrong, but I bet when you get the 1099 for the CD both the interest and principal penalties will be combined in the penalty box.  Technically, the penalty is defined as simple interest for x days (depending on the term of the CD).  I would bet the interest earned on the CD will also be the total interest, including that which was accrued and listed as the interest penalty.  If that is the case, it would be more accurate to show the total penalty so you can match it to the 1099.  This is the 1st year I have cashed CD early, because of the rapid change in rates, so I will find out which way is better myself.


Thank You,

Gyle McCollam

Gyle McCollam

gmccollam at live.com<mailto:gmccollam at gyleshomes.com>           email

________________________________
From: Stephen <rilesthemtobelieve at gmail.com>
Sent: Sunday, January 15, 2023 5:54 PM
To: Murugan Muruganandam <m.muruganandam at hotmail.com>; Gyle McCollam <gmccollam at live.com>; gnucash-user at gnucash.org <gnucash-user at gnucash.org>
Subject: Re: [GNC] Certificate of Deposit Early Withdrawal Penalty Account Entry

Interest is accounted for as income per CD account. The way I ended up doing it allows me to see how much interest I have earned by each and all accounts and the interest penalty and principal penalties are noted as to which account they were applicable but I do not track the penalties account by account (because the penalty is for closing the account -- a one time event).

On 1/15/2023 2:59 PM, Murugan Muruganandam wrote:
stephen

one inquisitive question. did you receive any interest on the CD at all earlier and if so how did you account it




Saludos Cordiales


Murugan

________________________________
From: gnucash-user <gnucash-user-bounces+m.muruganandam=hotmail.com at gnucash.org><mailto:gnucash-user-bounces+m.muruganandam=hotmail.com at gnucash.org> on behalf of Stephen <rilesthemtobelieve at gmail.com><mailto:rilesthemtobelieve at gmail.com>
Sent: Sunday, January 15, 2023 5:38 PM
To: Gyle McCollam <gmccollam at live.com><mailto:gmccollam at live.com>; gnucash-user at gnucash.org<mailto:gnucash-user at gnucash.org> <gnucash-user at gnucash.org><mailto:gnucash-user at gnucash.org>
Subject: Re: [GNC] Certificate of Deposit Early Withdrawal Penalty Account Entry

Thanks to you and Murugan I got this sorted. As usual, over-thought and
over-wrought. Although I'm sure I could show all the changes in one
split entry it was easiest for me to credit the interest 162.89 as one
standalone entry first. Then I could see my way clearly to showing the
two penalty sub-amounts totaling 1529.51. Intuitively I fairly certain I
could have shown the interest earned among the splits all as one entry
but I'm going to quit while I'm ahead. I just didn't want to lose the
detail of the separate penalty amounts nor their total.  Again, many thanks.

On 1/15/2023 11:23 AM, Gyle McCollam wrote:
> I would enter this Murugan suggested. Let's say the balance of the CD
> prior to closing on your books was $300,000.00
>  Using the amounts you have given:
>                         Debit       Credit
> Asset: Acct moved to    $298,633.38  (Closing Balance)
> Income: CD Interest                       $162.89
> Exp: Bank: Penalties          $1529.51
> Asset: CD                              $300,000.00 (Balance just prior
> to this entry)
>
> Thank You,
>
> *Gyle McCollam*
>
> Gyle McCollam
>
> gmccollam at live.com<mailto:gmccollam at live.com> <mailto:gmccollam at gyleshomes.com>email
>
> ------------------------------------------------------------------------
> *From:* gnucash-user
> <gnucash-user-bounces+gylemc=gmail.com at gnucash.org><mailto:gnucash-user-bounces+gylemc=gmail.com at gnucash.org> on behalf of
> Murugan Muruganandam <m.muruganandam at hotmail.com><mailto:m.muruganandam at hotmail.com>
> *Sent:* Sunday, January 15, 2023 11:17 AM
> *To:* Stephen <rilesthemtobelieve at gmail.com><mailto:rilesthemtobelieve at gmail.com>; gnucash-user at gnucash.org<mailto:gnucash-user at gnucash.org>
> <gnucash-user at gnucash.org><mailto:gnucash-user at gnucash.org>
> *Subject:* Re: [GNC] Certificate of Deposit Early Withdrawal Penalty
> Account Entry
> hi Stephen
>
> The entries can be input as follows.  I could not understand where you
> are getting orphans or imbalances  if you can explain it would be easy
>
> Account Dr      Cr      Notes
> Principal       Asst: Bank Account      Asst: CD Account        $
> Principal amount
> Interest        Asst: Bank Account      Income: CD Interest
> Interest earned + partial month $162.89
> Penalty Interest        Exp: Bank: Penalties    Income: CD
> Interest     Total penalty $1.529,51
>
>
>
>
>
> Saludos Cordiales
>
>
> Murugan
>
> ________________________________
> From: gnucash-user
> <gnucash-user-bounces+m.muruganandam=hotmail.com at gnucash.org><mailto:gnucash-user-bounces+m.muruganandam=hotmail.com at gnucash.org> on
> behalf of Stephen <rilesthemtobelieve at gmail.com><mailto:rilesthemtobelieve at gmail.com>
> Sent: Sunday, January 15, 2023 4:30 AM
> To: gnucash-user at gnucash.org<mailto:gnucash-user at gnucash.org> <gnucash-user at gnucash.org><mailto:gnucash-user at gnucash.org>
> Cc: gnucash-user at gnucash.org<mailto:gnucash-user at gnucash.org> <gnucash-user at gnucash.org><mailto:gnucash-user at gnucash.org>
> Subject: [GNC] Certificate of Deposit Early Withdrawal Penalty Account
> Entry
>
> I had a CD that I closed before it matured. The bank applied a penalty
> of 90 days interest at the CD rate. In fact the total penalty was
> figured as the sum of principal penalty of $1,366.62 and penalty amount
> paid from interest earned for the period of a partial month of $162.89
> for a total penalty of $1,529.51. The statement clearly shows a payment
> of +$162.89 and a penalty of -$162.89 and a penalty amount from
> principal of the $1,366.62.  The interest earned and penalized is a net
> $0 so I could just book the $1,366.62 as a charge to the CD account and
> as as an charge to an early withdrawal penalty account to obtain the
> closing balance on the account. But it seems to me that I should be
> booking at least 3 splits to show the interest earned account and
> interest earned penalized account and the rest of the penalty as a
> charge to the CD account but the numbers produce orphans or imbalances.
> I'm treating all entries as income items so interest earned, interest
> penalized, and a principal penalty. They are multiple entries and not
> multiple splits in the CD income account. Is this the correct way to
> book this? Some guidance would be appreciated. Thanks in advance.
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