Integrated Accounting
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
enableAccrualActivityPostingis 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.
Updated 8 months ago
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