Interest Liquidation

Note: Please refer to the 'Common Topics_Interest Accrual' for details on Interest accrual.

Liquidation is the process by which the accrued interest is posted to the account as a transaction.

Points to remember

Liquidation is done through Liquidation Batch and the effect of this to card account comes as part of Liquidation batch (Event code: INLIQR) in case of Receivable (Debit) and Interest payout batch (Event Code: INLIQP) INTPAY) in case of Payable (Credit).
Liquidation process does the liquidation for each balance class under a single transaction reference number and hence, the user can see accounting entries with reference to different balance classes by using the same transaction reference number.
Based on the liquidation date selected Aura derives the period for which interest is to be liquidated.

Example: Liquidation batch liquidates accrued interest from (Previous INLIQP date + 1) to Current INLIQP date. For the first cycle Previous INLIQP date = Account opening date.

The value date for the liquidation entries is in general, the Liquidation date; however, if the transaction codes used for the liquidation have a different value date configuration, the liquidation date may change based on this.
The Currency used for the entries would be the account currency.

Interest Payable

Liquidation for the Credit interest, i.e., interest payable on the credit balance in the account, happens in two steps

Liquidation batch (Credit) (Event Code: INLIQP)

When liquidation is successful the following accounting entries are posted:

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
GL mapped for the Product as ‘Accrued interest payable – Liability’	Transaction code mapped for the Product as Interest accrued payable (DB / GL)	Liquidation date	Account currency	Debit
GL mapped for the Product as ‘Payout GL’	Transaction code mapped for the Product as ‘Interest paid (CR / GL)’	Liquidation date	Account currency	Credit

Payout batch (INTPAY)

On Interest liquidation, the payout amount will be liquidated to the account

The Payout batch posts the following accounting entries:

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
GL mapped for the Product as ‘Payout GL’	Transaction code mapped for the Product as ‘Interest paid (DB / GL)’	Liquidation date	Account currency	Debit
Account number	If Balance Class has a transaction code for Interest Liquidation: Transaction code mapped for the balance class as ‘Transaction Code for Interest Liquidation’ // If Balance Class does not have a transaction code for Interest Liquidation: Transaction code mapped for the Product as ‘Interest paid (CR / Client)’	Liquidation date	Account currency	Credit
GL mapped for the Product as ‘Master GL’	Transaction code mapped for the Product as ‘Master leg (CR / GL)’	Liquidation date	Account currency	Credit

Interest Receivable

Liquidation for the Debit interest, i.e., interest receivable on the debit balance in the account, happens separately for within limit balance, over-limit balance and overdue balance

Liquidation batch (Debit) (Event Code: INLIQR)

If the balance in the card account is less than or equal to the approval limit for the account, the interest receivable will be calculated using the Within Limit Interest Scheme for the Default Balance Class defined for the Product. For other balance classes, the respective interest schemes defined for each balance class will be used.

When liquidation for Within Limit is successful following accounting entries are posted:

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
Account number	If Balance Class has a transaction code for Interest Liquidation: Transaction code mapped for the Balance Class as ‘Transaction Code for Interest Liquidation’ // If Balance Class does not have a transaction code for Interest Liquidation: Transaction code mapped for the Product as ‘Interest received within limit (DB / Client)’	Liquidation date	Account currency	Debit
GL mapped for the Product as ‘Master GL’	Transaction code mapped for the Product as ‘Master leg (DB / GL)’	Liquidation date	Account currency	Debit
GL mapped as ‘Authorised interest receivable accrued - Asset’	Transaction Code mapped for the Product as ‘Interest accrued within limit (CR / GL)’	Liquidation date	Account currency	Credit

- Over limit

In case the balance of any account goes beyond the limit specified for the account, the interest receivable on such over limit amount will be calculated using the Over limit Interest scheme defined for the Account.

When liquidation for Over limit is successful, the following accounting entries are posted.

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
Account number	Transaction code mapped as ‘Interest received – over limit DB / Client)	Liquidation date	Account currency	Debit
GL mapped for the Product as ‘Master GL’	Transaction code mapped as ‘Master leg (DB / GL)’	Liquidation date	Account currency	Debit
GL mapped as ‘Over limit interest receivable accrued - Asset’	Transaction Code mapped as ‘Interest accrued over limit (CR / GL)’	Liquidation date	Account currency	Credit

- Overdue

When an account has any overdue, i.e., when the payments received by due date + grace days does not cover the Amount required, the interest on the overdue amount will be calculated using the Overdue interest scheme defined for the Account.

When liquidation for Overdue is successful following accounting entries are posted

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
Account number	Transaction code mapped as ‘Interest received – overdue (DB / Client)	Liquidation date	Account currency	Debit
GL mapped for the Product as ‘Master GL’	Transaction code mapped as ‘Master leg (DB / GL)’	Liquidation date	Account currency	Debit
GL mapped as ‘Overdue interest receivable accrued - Asset’	Transaction Code mapped as ‘Interest accrued overdue (CR / GL)’	Liquidation date	Account currency	Credit

Effect of Minimum Interest to pay / receive on Liquidation:

If Minimum interest is maintained for the Payable (Credit) and Receivable (Debit) interest, Aura does the following checks before liquidation:

Interest Payable:

If Amount to be liquidated (Payout) is less than the Minimum interest to pay, then this amount is treated as an Expense and the following accounting entries are passed:

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
GL mapped for the Product as ‘Accrued interest payable – Liability’	Transaction code mapped for the Product as ‘Income due to interest threshold (DB / GL)’	Liquidation date	Account currency	Debit
GL mapped for the Product as ‘Income due to interest threshold’	Transaction code mapped for the Product as ‘Income due to interest threshold (CR / GL)’	Liquidation date	Account currency	Credit

Interest Receivable:

If Amount to be liquidated is less than the Minimum interest to receive, then this amount is treated as an Expense and the following accounting entries are passed:

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
GL mapped for the Product as ‘Expense due to interest threshold’	Transaction code mapped for the Product as ‘Expense due to interest threshold (DB / GL)’	Liquidation date	Account currency	Debit
GL mapped as ‘Authorised interest receivable accrued - Asset’	Transaction Code mapped as ‘Expense due to interest threshold (CR / GL)’	Liquidation date	Account currency	Credit
GL mapped as ‘Over limit interest receivable accrued - Asset’	Transaction Code mapped as ‘Expense due to interest threshold (CR / GL)’	Liquidation date	Account currency	Credit
GL mapped as ‘Overdue interest receivable accrued - Asset’	Transaction Code mapped as ‘Expense due to interest threshold (CR / GL)’	Liquidation date	Account currency	Credit

Effect of Waiver on Liquidation:

When an account has been marked for waiver of interest accrual, and if there is any interest accrued, the following accounting entries are passed.

Interest Payable:

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
GL mapped for the Product as ‘Accrued interest payable – Liability’	Transaction code mapped for the Product as ‘Interest waived (DB / GL)’	Liquidation date	Account currency	Debit
GL mapped for the Product as ‘Interest waived – Income’	Transaction code mapped for the Product as ‘Interest waived (CR / GL)’	Liquidation date	Account currency	Credit

Interest Receivable:

Account / GL	Transaction Code	Value date	Currency	Debit / Credit
GL mapped for the Product as ‘Interest waived - Expense’	Transaction code mapped for the Product as ‘Interest waived (DB / GL)’	Liquidation date	Account currency	Debit
GL mapped as ‘Authorised interest receivable accrued - Asset’	Transaction Code mapped as ‘Interest waived (CR / GL)’	Liquidation date	Account currency	Credit
GL mapped as ‘Over limit interest receivable accrued - Asset’	Transaction Code mapped as ‘Interest waived (CR / GL)’	Liquidation date	Account currency	Credit
GL mapped as ‘Overdue interest receivable accrued - Asset’	Transaction Code mapped as ‘Interest waived (CR / GL)’	Liquidation date	Account currency	Credit