Integrated Accrual Accounting

Integrated accrual accounting recognizes loan income as it is earned, not just when cash is collected.
Once you enable the accrual rule on a loan product, COB and accrual jobs post receivable/income entries automatically, and every servicing action (repayment, waiver, charge-off, etc.) updates those ledgers in real time.

Enabling Accrual for a Loan Product

Set the accounting rule to ACCRUAL when defining or editing the product (POST/PUT /loanproducts).
Provide all mandatory GL accounts on the product:
- Fund source (disbursement credit)
- Loan portfolio (principal asset)
- Interest receivable, fee receivable, penalty receivable
- Interest income, fee income, penalty income
- Loan overpayment liability (for excess payments)
Add optional mappings if your policy requires them:
- Deferred income liability / income from capitalization (for capitalization features)
- Buy-down fee income / expense accounts
- Charge-off expense and allowance accounts
- Separate receivable/income accounts per charge type or business line
Schedule the jobs that drive accrual:
- Loan COB (Close of Business) – runs daily, calculates earned interest/fees, posts ACCRUAL transactions, updates delinquency snapshots.
- Accrual Activity Posting – optional, but required when enableAccrualActivityPosting is true; posts ACCRUAL_ACTIVITY transactions that move staged amounts into the GL.
- Other servicing commands (repayments, waivers, charge-offs) automatically call the reprocessing services to keep receivables consistent with the schedule.

Tip: Convert existing products in a sandbox first, run COB, then inspect the journal to confirm GL mappings before deploying to production.

Accounting Entries by Event

Event / Command	Debit	Credit	Notes
Disbursement (`POST /loans/{id}?command=disburse`)	Loan portfolio	Fund source	Recorded once per drawdown (multi-tranche supported).
Interest accrual (COB job)	Interest receivable	Interest income	Posted daily or on due date, depending on product settings.
Fee accrual (COB/job)	Fee receivable	Fee income	Applies to installment fees, specified-due-date fees, etc.
Penalty accrual (COB/job)	Penalty receivable	Penalty income	Generated when penalties are earned but unpaid.
Accrual activity posting (if `enableAccrualActivityPosting`)	Interest/fee/penalty receivable	Interest/fee/penalty income	Summarizes earned amounts per installment or period; run nightly/monthly.
Standard repayment (`command=repayment`)	Cash / Bank	(1) Penalty receivable (2) Fee receivable (3) Interest receivable (4) Loan portfolio	Allocation order follows the product’s transaction strategy; overpayments flow to overpayment liability.
Charge payment (`command=payCharge`)	Cash / Bank	Fee or penalty receivable	Use when a charge is paid separately from the installment.
Prepayment / payoff (repayment covering full balance)	Cash / Bank	Remaining receivables + principal	Always refresh payoff quotes right before paying to capture overnight accruals.
Interest waiver (`command=waiveInterest`)	Interest income	Interest receivable	Reverses accrued-but-unpaid interest; reprocessing removes future accruals.
Charge waiver (`command=waiveCharge`)	Fee or penalty income	Fee or penalty receivable	Clears outstanding fees/penalties while leaving the audit trail.
Charge adjustment (`command=adjustment`)	Fee/Penalty income	Fee/Penalty receivable	Used for partial concessions; amount equals the reduction.
Charge refund (`command=refundCharge`)	Fee/Penalty income	Cash / Bank	Returns previously collected charge to the borrower.
Chargeback (`command=chargeback`)	Cash / Bank (reversed)	Loan portfolio + receivables (reversed)	Mirrors the original repayment; any chargeback fees post separately if configured.
Accrual correction (`ACCRUAL_ADJUST`)	Receivable or income (depending on direction)	Opposite side	System-generated when COB replays accruals after schedule changes.
Charge-off (`command=charge-off`)	Charge-off expense / allowance	Loan portfolio + outstanding receivables	Strategy determines exact split (accelerated vs regular).
Write-off (`command=writeoff`)	Loan loss expense	Loan portfolio (and any uncollected receivables)	Ends accruals permanently; recoveries use the recovery command.
Recovery after charge-off/write-off (`command=recoveryPayment`)	Cash / Bank	Recovery income (or allowance account)	Treated as post-loss cash collection.
Income capitalization (dynamic schedule loans) (`command=capitalizedIncome`)	Deferred income liability	Interest receivable	Moves accrued interest into deferred income at capitalization points.
Recognize capitalized income (`command=incomeFromCapitalization`)	Deferred income liability	Income from capitalization	Recognizes deferred income over time per the selected strategy.
Buy-down fee amortization (`command=buyDownFee`)	Buy-down expense (or contra income)	Buy-down income	Used on dynamic schedule “merchant subsidy” products.
Reschedule / restructure (`command=reschedule`)	—	—	No direct GL entry; subsequent COB run recomputes accruals and future receivables.
Interest pause (loan term modification with `interestFreeze`)	—	—	Suspends new accruals for the pause window; COB skips postings during the pause.
Foreclosure / close (`command=foreclosure` or `command=close`)	Cash / Bank	Remaining receivables + principal	Run COB on the effective date so all earned income is posted before the loan moves to CLOSED.

All system-generated transactions emit business events (LoanTransactionAccrualActivityPost, LoanChargeOffPost, etc.). Use the events stream to keep external ledgers or data warehouses in sync.

Monitoring & Reconciliation

Daily: Confirm the Loan COB and accrual jobs finish successfully; re-run immediately if they fail.
Weekly/Monthly: Reconcile receivable balances (interest, fee, penalty) against the loan trial balance.
On servicing actions: After waivers, restructures, charge-offs, or recoveries, verify the corresponding GL postings and receivable reductions.
Reports & statements: Integrated accrual feeds monthly statements, aging reports, and delinquency metrics; ensure finance teams know where to find earned vs collected views.

With accrual accounting configured and the jobs running on schedule, Embarc keeps loan receivables and income ledgers accurate automatically — freeing your teams to focus on analysis rather than manual journal entries.