THIS IS A TEST INSTANCE. ALL YOUR CHANGES WILL BE LOST!!!!
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Migrated over from MifosForge - last edit on June 27, 2014. |
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Overview
Similar to: Periodic Accrual for Loans financial Financial institutions will want to recognize expenses/incomes accrued on deposit product accounts too similar to the Loan products.
Today, In Fineract deposit products do not support accrual accounting. This spec is to enhance the accrual accounting in Mifos Fineract to support periodic accrual of expenses/incomes on deposit accounts too.
Deposit Products refers to the Savings products, Fixed Deposit Products, and Recurring Deposit Products of Fineract Application, and accrual accounting option should be available for all three types.
Deposit product expenses: Interest to be paid on deposit accounts
Deposit product incomes: fees, interest on overdrafts
The organization may
a) recognize income/expenses periodically (as specified as a configuration - the same as what is specified at: Periodic Accruals for Savngs):
OR
b) recognize income/expenses as on a particular date (which will be manually specified when invoking the accrual job).
Background and strategic fit
This feature will allow Mifos Fineract to cater to the standard accounting procedures followed by larger Financial Institutions and move towards making Mifos Fineract a more accepted core banking solution by including accrual accounting for deposit products tooas well.
Requirements/User Stories
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| # | Title | User Story | Importance | Notes |
|---|---|---|---|---|
| 1 | Automatic periodic accrual for deposits | At the frequency specified by the head accountant, |
| Fineract internally invokes a batch job that will take the current date as input and recognize all unrecognized income and expenses for deposit products till this date | Must have |
| 2 | Manual accrual for deposits | As a head accountant, I wish to manually invoke the accrual job |
| on a specific date to recognize all income and expenses for all deposit products till this date | Must have |
Business Rules
As specified at: Periodic Accruals for Savngs
Attributes
No extra attributes to be captured than what is specified at: Periodic Accruals for Savngs
| 3 | selected charges/fees to be considered for accrual (only for savings related charges) | As an organization, there would be few charges which are not required to be accrued(for ex:- charges charged at the beginning of the loan) and few charges are to be considered for accrual. Need an option at the charge product level to select the particular charge to get recognized as accrual income or not. NOTE: accounting entries are mentioned below | Must have |
Security and Permissions
New permissions to be introduced for:
- Manually invoking the "Period-Ending Accrual for Deposits" job.
Mifos Functionality Enhancements
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- None
Changes to Existing Screens
- 'Deposit product products' screens to be enhanced to capture the accrual accounting General Ledger account heads
- 'Execute Periodic Accrual Accounting' screen to be enhanced to switch between the Deposit product/Loan product for the execution of the accrual entries at the specified date.
- 'Charges products' screen to have an option to select accrual accounting or not.
Changes/Enhancements to Batch Jobs
A new batch job which will do the following for all active deposits:
- Calculate the apportioned unrecognized expense for:
Period start: Last time any expense was recognized
Period end: a date which is given as input (includes the date given) - Calculate the apportioned unrecognized income for:
Period start: Last time any income was recognized
Period end: a date which is given as input (includes the date given) - Pass journal entries for recognizing this income or expnse expense - the entries will follow the same principles as what is specified under : Periodic Accruals for Savngs (under section "Basic Scenario" under "Automated System Accrual Event")"Changes/Enhancements to Accounting Entries"
- If the income or expense to be recognized changes due to any backdated entries made - then the job will cancel existing accounting entries that recognized expense or income and will pass new entries with corrected amounts(similar to the loan product posting behavior)
This new batch job will be invoked at the frequency specified in the "Accrual Setup" (under Accounting)can be invoked from the enhanced 'Execute Periodic Accrual Accounting' screen under the Accounting section or can be invoked as a cron -job at the scheduled timings from the 'scheduler job' screen
At each account level, 'post interest' and 'post interest as on' actions should also post accrual transactions(as of interest posting date) if the respective products are configured with accrual accounting.
Changes/Enhancements to Accounting Entries
Deposit Products need to capture new additional accounting General Ledger heads under which accrual of incomes and expenses will be done.
| Under |
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| Assets | Under liability |
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| Fees Receivable | Interest Payable |
| Penalties Receivable |
Under liabilities: Interest Payable
Recognition of Interest to be paid:
Journal Entries for Interest posting
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| Accrual Recognition Transaction for Interest JE | Actual Interest Posting Transaction JE |
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| Interest on Savings (Expenses) Dr |
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Interest Payable (Liability) Cr | Interest Payable (Liability) -Dr Savings Control (Liability) - Cr |
Journal Entries for fees/penalties posting with accrual entry configured at the charge product level
| When a customer is charged a Fee/Penalty JE | Recognition of |
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| Fees/Penalty Income JE | |
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| Savings Control (Liability) Dr Fees Receivables/Penalties Receivables (Asset) Cr | Fees Receivables/Penalties Receivables |
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| (Asset) Dr |
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| Income from |
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| Fees/Penalties (Income) Cr |
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User interaction and design
Journal Entries for fees/penalties posting without accrual entry configured at the charge product level
| Recognition of Fees/Penalty Income JE |
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| Savings Control (Liability) Dr Income from Fees/Penalties (Income) Cr |
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Exception Handling
- If income and expense was were recognized already for a deposit account on or after the date specified, and there is no new backdated transaction for this account, then the batch job will skip this deposit account.
- It should be possible to re-run the batch job for a given date (for example: after making back dated entries, accountants wants to re-run the job for a given date)
Reporting
None
APIs
An API to invoke the periodic accrual batch job for deposits as on a specified date
Notes
None
Questions
Below is a list of questions to be addressed as a result of this requirements document:
| Question | Outcome |
|---|---|
| Confirm that the handling of backdated transactions as described above is accurate from an accounting perspective | TBD |
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- Any undo or redo of financial transactions at the deposit account level should adjust the already posted accrual transactions according to the new values.
- The system should not post accrual entries for dates before the last accounting closure date. the system should display the deposit account IDs where accrual posting didn't happen because of the closure date after the job is complete. (this is helpful for investigation)
- Deposit product accounting setting should override the charge product level accrual settings
- example:- if a charge product is set to post accrual transactions and if the deposit product is having cash accounting, then the charge associated with that deposit product will post only the "Recognition of Fees/Penalty Income JE" entries for those deposit accounts.
- When the product accounting is set to cash based, then all charges should obey the cash based settings and JE should be passed as Cash based. when the product is set to accrual accounting, then charges that has accrual enabled, should post accrual JE, and charges that doesn't have accrual enables, should post cash based JE entries.