Accrual

The interest accrued on a contract is calculated as the sum of (Interest Remaining + Interest Accrued Not Due). If you add the Interest Paid to this calculation, you arrive at the interest accrued over the life of the contract. 

Interest accrual is calculated based on the last accrual date on the contract. Each accrual transaction captures the incremental interest amount since the last accrual transaction. Therefore, at a given time, the total interest accrued is the cumulative amount of all the accrual transactions. For example:

If daily interest accrued is 0.33, (Day 1 = 0.33, Day 2 = 0.66, Day 3 = 0.99....) Then,

• Accrual Transaction 1 is created for 0.33.

• Accrual Transaction 2 is created for 0.66-0.33 = 0.33

• Accrual Transaction 3 is created for 0.99-0.66 = 0.33

• and so on.

The frequency of the accrual transaction can be Daily or Monthly.

For Monthly accrual, the Accrual Entry Job identifies the eligible contracts using the fields Accrual Based Accounting and Accrual Entry Frequency, defined at the lending product level, and creates accrual entries where the Next Accrual Entry Date specified in a contract matches the current date. The interest accrual amount is calculated as: (((Interest Remaining + Interest Accrued Not Due) + Interest Paid) - Interest Accounted For). The 'Interest Accounted For' amount is calculated at run time, as the interest accrued between the LAD and the current date.

You can view the accrual entry in the Accruals tab within the Transactions tab in a contract. The following fields are displayed:

Once the batch job runs, the Next Accrual Entry Date (based on accrual entry frequency) and the Accrual Amount Accounted For fields on the contract are updated.

If you are using a different accrual accounting model, you do not need to select the Accrual Based Accounting checkbox in the lending product.