To start with I am not an accountant. I have searched under Mutual Fund as well as CD Interest and have not been able to find anything.
We have a CD that matured. The CD value at the time of purchase was $245,000 (sitting in account #1376). At maturity the CD value is $251,856.16.
I have the $245,000 sitting in account #1376. I have not been "accruing" the interest.
1. Do I need to set up an Accrued Interest Account?
2. I need to transfer the total value ($251,856.16) to a different financial institution (which I already have set up as #1320).
I know how to transfer the original $245,000 (From #1376 to #1320) but have no idea what kind of entry to get the interest of $6,856.16 to account #1320.
Honesty check...I am so confused on when and how to use the Deferred Income/Interest account and/or the Accrued Interest/Income account...but will have to leave that subject matter for later.
Appreciate the feedback!!
CD Interest
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Re: CD Interest
Since you haven't been accruing the interest, I believe the transaction would be much simpler - something like the following:
01-1320-000 Bank Asset (Debit) $251,856.16
01-1376-000 CD Asset (Credit) $245,000.00
01-4460-000 Investment Income (Credit) $6,856.16
Also - disclaimer - I'm not an accountant either - I'm pretty sure the unrealized gains or accrued interest thing applies over the life of the investment and then transfers out to regular income here at the end anyway.
01-1320-000 Bank Asset (Debit) $251,856.16
01-1376-000 CD Asset (Credit) $245,000.00
01-4460-000 Investment Income (Credit) $6,856.16
Also - disclaimer - I'm not an accountant either - I'm pretty sure the unrealized gains or accrued interest thing applies over the life of the investment and then transfers out to regular income here at the end anyway.
Re: CD Interest
When I have dealt with interest for our CD's, I have done the following, using your numbers as an example:
Entered via Fund Accounting
01-1376 CD Asset (debit) - $6,856.16
01-4460 Interest Income (credit) - $6,856.16
01-1320 Bank Asset (debit) - $251,856.16
01-1376 CD Asset (credit) - $251,856.16
The reason I do it this way is it shows that the CD matured and received the interest in the CD account first, then the entire amount was transferred out. It also makes it easier to see where all interest income (assuming you use the same interest income credit account for other interest bearing accounts) is associated for each type of bank asset (CD, savings, money market, checking, etc.).
I understand that the debits/credits equal as shown in the previous post, but I prefer to show the transaction flow for activity history reflecings the actual movement of money with regards to interest income.
You would not necessarily need to do two transaction entries, but you could put it as one entry, with the four fields above. This may make it easier to show what you did and why all in one spot. But, it would properly show the flow of money into the CD asset as that is where it was earned.
Entered via Fund Accounting
01-1376 CD Asset (debit) - $6,856.16
01-4460 Interest Income (credit) - $6,856.16
01-1320 Bank Asset (debit) - $251,856.16
01-1376 CD Asset (credit) - $251,856.16
The reason I do it this way is it shows that the CD matured and received the interest in the CD account first, then the entire amount was transferred out. It also makes it easier to see where all interest income (assuming you use the same interest income credit account for other interest bearing accounts) is associated for each type of bank asset (CD, savings, money market, checking, etc.).
I understand that the debits/credits equal as shown in the previous post, but I prefer to show the transaction flow for activity history reflecings the actual movement of money with regards to interest income.
You would not necessarily need to do two transaction entries, but you could put it as one entry, with the four fields above. This may make it easier to show what you did and why all in one spot. But, it would properly show the flow of money into the CD asset as that is where it was earned.