FI Entries during Interest rate instrument posting

[Ahmed_Samir]

Dear Experts,

I have a case in the Money market area, i'm using product type 55A (Interest rate instrument) for handling the loans for a customer.

he wants the FI entries to be as below:

When receiving the loan:

Dr. Accrual bank interest Exp.           200,000

Dr. Bank- Main Account                    1,000,000

     Cr. Loan Account                               1,200,000

At the end of each month:

Dr. bank interest Exp.                        10,000

     Cr. Accrual Bank interest Exp.           10,000

At the end of contract:

Dr. Loan Account                               1,000,000

     Cr. Bank                                              1,000,000

As far as i know, this should be the entry:

When receiving the loan:

Dr. Bank- Main Account                    1,000,000

     Cr. Loan Account                               1,000,000

At the end of each month:

Dr. bank interest Exp.                        10,000

     Cr. Accrual Bank interest Exp.           10,000

At the end of contract:

Dr. Accrual bank interest Exp.           200,000

Dr. Loan Account                               1,000,000

     Cr. Bank                                              1,200,000

To sum up, he wants to post the accrual for the bank interest at the beginning of the contract, is that applicable?

you assistant is really appreciated.

Regards,

Ahmed Samir

[Gustavo_Vazquez · Accepted solution]

Hi Ahmed,

You can't post interest at the begining of the transaction in Product Type 55A.

You could enter an expense, but interest will be calculated based on the days and interest rate you lend/borrow money.

You could use Product Type 54A and create your own cashflow.

Kind Regards

[Ahmed_Samir · Accepted solution]

Dear Mr. Gustavo,

Thanks for your fast respond.

on the G/l level, how to display the dues/accrued interest expenses for the whole contract at the beginning of the contract.

as the entry refers, the customer wants to post all the accrued exp for interest at the beginning of the contract and then reduce the amount each month.

how to handle such requirements on SAP?

thanks for your assistant.

Regards,

Ahmed Samir

[Gustavo_Vazquez · Accepted solution]

Hi Ahmed,

This doesn't look like Interest Rate Instrument (55A), it looks more like an accrual process in CO.  If customer pays all interest ate the beginging of the transaction, then is a zero interest trx and all you have to return is Investment Capital.

Interest will be posted based on:

- Amount

- tax rate

- time elapsed

If one of them is missed, then no interest will be posted.

Kind Regards

[Ahmed_Samir · Accepted solution]

Dear Mr. Gustavo,

The Standard entries for the interest rate instrument to post to FI (using TBB1, TPM44) the below entries will happened:

When receiving the loan:

Dr. Bank- Main Account                    1,000,000

     Cr. Loan Account                               1,000,000

At the end of each month:

Dr. bank interest Exp.                        10,000

     Cr. Accrual Bank interest Exp.           10,000

At the end of contract:

Dr. Accrual bank interest Exp.           200,000

Dr. Loan Account                               1,000,000

     Cr. Bank                                              1,200,000

Please confirm if i understand correctly.

So how can i display the accrued interest per contract on the G/l level?

did you got my point, the interest will be payed at the end of contract or with the installment on monthly basis.

Regards,

Ahmed Samir

[Gustavo_Vazquez · Accepted solution]

Hi Ahmed,

Your example was perfect.

The interest per transaction can be displayed (and posted) with TPM44  at the end of the month (or any date)  and you will have the accrued interest from the last time interest was paid. The interest is posted and then reversed the next day.

The interest in the Cashflow will be paid (on Money Market products 5**) with TBB1 based on the Interest Frecuency:

- Daily

- Monthly

- Last day of month

- At end of term

The capital will be payed on the instalment plan (reduces capital) you choose:

- Final Repayment         (At the end of the transaction)

- Instalment repayment  (Interest is the same always, capital reduces)

- Annuity repayment       (The payed amount is always the same, the proportion of capital

                                        and interest payed is variable)

The interest calculation is based on the Frecuency, so:

1) Final repayment - Rate 12% - Frecuency Monthly- 2 Months loan

      T0

              Bank         10.000

              Loan                      -10.000

      T0 + 1month

              Interest      1.000

              Bank                        -1.000

      T0 + 2 months

              Loan         10.000

              Interest       1.000

              Bank                      -11.000         

2) Final repayment - Rate 12% - Frecuency "At end of term" - 2 Months loan

      T0

             Bank         10.000

             Loan                       -10.000

      T0 + 1 month

             ---------------

      T0 + 2 months

             Loan         10.000

             Interest       2.000

             Bank                       -12.000

Hope this clarifies.

Kind Regards

[Ahmed_Samir · Accepted solution]

Dear Gustavo,

Thanks for your clarification, it's really appreciated.

could you provide me with clarification for this point "you will have the accrued interest from the last time interest was paid. The interest is posted and then reversed the next day."

i don't reverse the accrued entry, each month end i post to this accrued exp account and at the end of contract the below entry should happened:

Dr. Accrued exp. (with the value of the interest for the whole contract)

Dr. Loan Account (loan value)

     Cr. Bank

Regards,

Ahmed Samir

[Gustavo_Vazquez · Accepted solution]

Suppose you have a loan for 2 months which begins on 15-Apr and the frecuency of the interest is monthly,

At the end of the April you would like to know accrued interest, run TPM44 and the system will calculate interest from 15th to the end of the month (30th) even if you haven't payed any. On May 15th, with TBB1 you will post interest calculated from 15th April-15th May. The next time you run TPM44 it will calculate interést from 16th May to 31th May.

The posted made on 30th April or 31th May will be reversed on 1st May or 1st June respectively.

Good to know the functionality Nikhil talked about below

Kind Regards

[Ahmed_Samir · Accepted solution]

Dear Gustavo,

Is it applicable to for the accrued interest account which will be posted to at the end of term ,, be posted to at the beginning of the team and TPM44 entry (Dr intreset exp/Cr. Accrued interest exp)

to be the last t.code to post to this account ?!

is there is any configuration steps might do that?

making the posting logic like upside down , instead of posting TPM44 entry and then the accrued exp entry at the end of term we make the posting to accrued first then all the TPM44 posting.

Regards,

Ahmed Samir

[Former Member]

Hi Ahmed,

1. You can certainly post Interest at start of the contract. In the structure tab of the transaction you click on Detail view Interest Condition (Small button to the right next to Condition type field), in there under update, you have rule, there you can select the option 11 - Regular / Due Date at the start of the Period.

2. You Can also have the accrual not reverse the next day - by configuring Difference procedure. For this you need to activate Business Functions - FIN_TRM_LR_FI_AN and FIN_TRM_LR_FI_AN_2 .By Configuring the Difference procedure the accrued interest will not reverse and will be cleared at the end of the contract.

Regards,

Nikhil

[Ahmed_Samir]

Dear Nikhil,

Thanks for your respond, i'm familiar this this option, but my case is as below:

1- Suppose that i borrowed from bank 1,000,000 USD

2 - the interest for the contract is 200,000 on the whole contract.

3- my customer wants during receiving the loan the system to post the below entry:

Dr. Bank                              1,000,000

Dr. Accrued Bank interest     200,000 (Not the amount for one month but the whole contract)

     Cr. Loan Account                    1,200,000

4- at the end of each period the below entry should happened for Accrued interest

Dr. Bank interest                     33,000  (the amount for bank expenses for one month)

     Cr. Accrued Bank interest         33,000

5- after finalizing and paying the loan amount the below entry should happened:

Dr. Loan account

     Cr. Bank

----------------------------------------------

as you can see, it's the other way around, the Accrued bank interest account in the standard behavior from SAP should appear in the final entry only. how can to display the accrued account it in the opening entry.

thanks for your assistant.

Regards,

Ahmed Samir