[GNC] Certificate of Deposit Early Withdrawal Penalty Account Entry

Stephen rilesthemtobelieve at gmail.com
Mon Jan 16 13:25:18 EST 2023 

Yes. My interest earned  is always reinvested to enhance compounding as 
in case 1.

As you also mention, I am fairly certain that the principal and interest 
penalty as I am booking it reduces my actual net earnings income. But as 
Gyle McCollum stated, I bet the total interest earned also will be 
reported on the 1099 INT and is taxable. Even if it is offset by the 
interest penalty in the bank statements. As I mentioned to Gyle, in the 
US the early withdrawal penalty (total) is an adjustment (reduction) to 
income.

You have been very helpful to my thinking about this issue and I 
appreciate yours and Gyle's comments.

On 1/16/2023 11:43 AM, Murugan Muruganandam wrote:
> thanks Stephen
>
> so it can be 2 cases
>
>  1. Interest re invested:
>      1. Cr: Income: Interest Earned and Dr: CD Account
>  2. interest non re invested
>      1. Cr: Income: Interest Earned and Dr: Bank: Bank Account
>
>
> in case of penalties , you should point the penalties to the same 
> Income: Interest Earned account to show the net earnings.
>
>
>
> Saludos Cordiales
>
>
> Murugan
>
> ------------------------------------------------------------------------
> *From:* Stephen <rilesthemtobelieve at gmail.com>
> *Sent:* Monday, January 16, 2023 2:32 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
> Some clarification: Murugan, I did earn interest on the CD throughout 
> most of 2022 and showed it as earned interest in the CD account 
> transactions and also in an earned interest transactions account.
>
>
> On 1/15/2023 4:54 PM, Stephen wrote:
>> 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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