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This document expands upon Introduction to Accounting in Finflux and describes the default accounting associated with Non Performing Assets when accrual accounting is associated with them
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If a payment is made for the entire accrued amounts, that is for a total of 340, the accounting entries generated would be as follows
| Event | GL Account | Debit | Credit |
|---|---|---|---|
| Payment of Interest, Fees and Penalties | Fund Source | 340 | |
| Interest Receivable | 300 | ||
| Fee receivable | 30 | ||
| Penalty receivable | 10 | ||
| Recovery of Interest Accruals in suspense | Liability due to Non Receipt of Interest from loans in NPA | 300 | |
| Income from Interest | 300 | ||
| Recovery of Fee Accruals in suspense | Liability due to Non Receipt of Fees from loans in NPA | 30 | |
| Income from Fees | 30 | ||
| Recovery of Penalty Accruals in suspense | Liability due to Non Receipt of Penalties from loans in NPA | 10 | |
| Income from Penalties | 10 |
Alternate scenario : Write-off on the 16th of March
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If a write-off is made for the entire accrued amounts on the NPA loan, that is for a total of 340, the accounting entries generated would reverse any balances in suspense accounts
| Event | GL Account | Debit | Credit |
|---|---|---|---|
| Write-off of Interest, Fees and Penalties | Liability due to Non Receipt of Interest from loans in NPA | 300 | |
| Liability due to Non Receipt of Fees from loans in NPA | 30 | ||
| Liability due to Non Receipt of Penalties from loans in NPA | 10 | ||
| Interest Receivable | 300 | ||
| Fee receivable | 30 | ||
| Penalty receivable | 10 |
Note that if this loan was not in an NPA status, the accounting entries would have debited an expense account instead instead of reversing "Suspense" income accounts, i.e
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