CD interest posting

KPegram · Post by **KPegram** » Wed Mar 05, 2008 10:40 am

I have been posting CD interest in 01-4510 on credit side. I realized that this interest income shows in the Excess Income/Expenses line on the Income & Expense statement. This is not a true reflection of I&E (since it's in the CD, not the checking account); so I'd like to know where I can post this interest amount so that it will only effect the CD.
Now I:
Debit 01-1335-000
Credit 01-4510-000
Thanks for your help.

Post by **Jeff** » Wed Mar 05, 2008 1:30 pm

This is not a true reflection of I&E

The interest belongs to the church, so the interest should be treated as income to the church. The excess income/expense line on the income statement will not necessarily match the change in the bank account. In fact in most cases it will not match the change in cash for a given month.

If you need to have this income reported separately, you may need to think about creating a new fund.

KPegram · Post by **KPegram** » Thu Mar 06, 2008 8:26 am

Thanks Jeff. If I created a new line in the Chart of Accounts in let's say 01-1390 and called it CD Interest, and posted to the credit side, where would it show on my Income & Expense Statement? We want this money to show only in the CD's since it's not in our checking account. Thanks for your help.

Post by **Jeff** » Thu Mar 06, 2008 8:42 am

1390 would be an asset account, if you credit this account, it is going to show a negative amount. Do you already have an account that shows the balance of this CD?

KPegram · Post by **KPegram** » Thu Mar 06, 2008 9:02 am

Yes Jeff. I have 2 CD's that are COA #'s 1320 and 1325 both with (positive) balances. Each month I need to enter the interest on the CD's so I Debit 1320 and 1325 with the interest accrued for the month. I just don't know where to put the credit side to reflect only in the CD section of my COA. Thanks.

Post by **Jeff** » Thu Mar 06, 2008 10:55 am

The interest is income to the church, so you would credit an income account and debit the CD account that earned the income. (I am making the assumption the interest is being added to the CD rather than you receiving the cash.)

RLM · Post by **RLM** » Thu Jun 12, 2008 8:50 pm

If I may jump in here ....

I have Money Market interest that I have been debiting to the Money Market account itself (because it is rolling into that account) and crediting the 01-3110-000 account. Do I need to reverse last last 5 months transactions and show the interest as credit 'income' and debit 'Money Market #?

Post by **Jeff** » Fri Jun 13, 2008 8:46 am

By directly debiting the 3110 account you are bypassing the income statement and that money is never shown as income. Pesonally I would want to see that money come in through the income statement because it is part of the overall income of the church.

RLM · Post by **RLM** » Fri Jun 13, 2008 9:23 am

Thank you, you are correct. Would it be best for me to 'reverse' those transactions, or to lump them into one journal entry?

Post by **Jeff** » Fri Jun 13, 2008 10:05 am

It depends on two things. First if those prior months are closed, the only option you have is to do one lump journal entry.

If the prior months are still open, how important is that each month show the correct income? If that is important, your only option is to correct each month. If you go the route of making a lump sum journal entry, it will look like all the income was received in the one month you post the correction to.

RLM · Post by **RLM** » Fri Jun 13, 2008 10:15 am

The months are still open, I will make the reversing entries & post them correctly as income. Thanks Jeff...

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