[GNC] Certificate of Deposit Early Withdrawal Penalty Account Entry

[Stephen]

I think you are probably correct about the penalty showing on the 1099 
as a combined amount though I swear I read something about the penalty 
amount on interest "showing to the right". Beats heck out of me where I 
read that but I can't find it now. OH WELL! I should get the 1099 pretty 
soon and we will see which it is and I can make the changes to my 
accounts accordingly.

One thing I also learned is that the early withdrawal penalty can be 
reported on 1040 Schedule 1 as a REDUCTION of income that carries back 
over to the 1040 to reduce ones AGI. Small blessings but I'll take it!

On 1/15/2023 9:22 PM, Gyle McCollam wrote:
> 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 1^st  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 <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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