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Fees Accounting

Last Updated: Sep 28, 2016 05:46PM CEST

 

Linking Fees to GL accounts

Fees Related Transactions and their Corresponding Accounting Entries

 

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Linking Fees to GL Accounts

When adding fees for a loan product, if accounting is enabled for the product then you have 2 options:

  1. Use Product Default accounts - as defined in the "Accounting Rules" section; in this case all fees would be posted through the same accounts
  2. Use specific accounts - as defined for each fee; this is a better approach for more granular accounting for fees, as well as more detailed financial reporting on different income sources.

If Cash Basis Accounting is used, then only a "Fee Income" account has to be specified. Deposit Accounts only support Cash Basis Accounting.

If Accrual Accounting is used, then fees will typically have 2 control accounts: 

  • Fee Receivable - can only be an Asset account; its balance will reflect the amount of fees charged (due) but not yet paid
  • Fee Income - can be either an Income or a Liability account; its balance will reflect the amount of fees earned; a Liability account can be used as control for those fees that are collected for third parties (typically: insurance fees)

For Disbursement Fees only the "Fee Income" account can be specified, since this fee is "paid" immediately at disbursement (either by deduction from the loan amount or capitalization onto the loan) and there is no use for a Fee Receivable GL Account.



For Deposit products:

Mambu allows linking Product Fees to different GL accounts for deposits. When an Accounting methodology is selected for Deposit Products, the "Fee Income" accounting rule for each predefined fee will be available. You can select from the dropdown menu the GL account of your choice for each fee. When a different GL account is chosen besides the Default, the fees will be posted to the assigned GL account - as it is currently done for loan accounts.

 

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Fees Related Transactions and their Corresponding Accounting Entries

Under Accrual Accounting, there are 2 types of transactions associated with fees: 

  1. Fee Applied - triggered by different events, manual or automated; in accounting, the Fee Applied Transactions generates an automated Journal Entry as follows​:
  • DEBIT - Fee Receivable (Asset)
  • CREDIT - Fee Income (Income/ Liability)
  1. Repayment - fees are always paid as part of a Repayment transaction; if a fee has been charged on the account, par of the next payment will be allocated to cover the outstanding fee due 
  • DEBIT - Fund Source (or specific Transaction Channel GL)
  • CREDIT - Fee Receivable (Asset)

Under Cash Accounting, only one journal entry is posted:

  1. Fee Applied - triggered by different events, manual or automated; in accounting, the Fee Applied Transactions generates an automated Journal Entry as follows​:
  • DEBIT - Deposit 
  • CREDIT - Fee Income (Income/ Liability)

 

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