Reporting ending termm deposit

[Jarmila]

HI,

I wanted to make sure I book the ending of a term deposit or any interest income earning security correctly to make sure it appears in the performance of the whole portfolio:

once the term note ends I do:
1/ record "Return of Capital" in the Data Register of the investment
2/ record negative distribution as "Brokerage Fee - not reinvested" for commission/fee paid in Data Register of the investment
3/ record distribution "Interest Income" not reinvested in Data Register of the investment
4/ and finally put the security as "hidden" as there are no shares anymore

Thank you !
Jarmila

[Mark]

Hi Jarmila,

It depends on your exact case, but in general you usually use a "sell" transaction instead of a "Return of Capital" when you get all your money back for some investment, and you no longer own shares. A Return of Capital of capital is more appropriate for when you get some money back, but still own the same number of shares.

Steps 2-4 look fine though for recording a fee/interest, and hiding the investment.

[Jarmila]

Hi Mark,

so if a bond matures I do a "sell" transaction ? It makes sense of course as the shares will go to zero however it is not really a sale transaction so I decided on the amortization/return of capital option - does either method affect my performance calculation ?

Kind regards
Jarmila

[Mark]

Hi Jarmila,

Yes, you should use a "sell" transaction. You are returning the shares for the money received.

[Jarmila]

Hi Mark,

so when does "amortization" come into play ?

Kind regards
Jarmila

[Mark]

Hi Jarmila,

Accretion and Amortization are used when you buy a bond at a discount or premium, and you want to adjust the cost basis between when you bought it, and when it matures. This typically would be recorded at the end of each taxable accounting period, while you still hold the bond. When the bond matures, and you receive the face value back, this is a sell transaction. You can read more about this in the documentation.

[twj332]

Have a CAD gov't bond 10 year bond with actual maturity of Nov 1 2019
face value $500.00 and has paid interest 1.40% twice yearly (Actual/365)
Interest accrued $58.42 to Sept 25/2019 when I transferred to RRSP in kind as cash.

I not sure how to record the sale/transfer so I pickup face value and coupon portion.
When I do a sell transaction I have a 58.42 left on bond.

Can I transfer to RSP then record the sale so accrued interest moves as well?
I need the 500.00 + 58.42 to end up in the RRSP.

Please let me know
(This was experiment to track a 10 year bond and learn on FM)
Thanks Terry

[Mark]

Hi Terry,

This sounds like you just need to record a sell and an interest income distribution. So, if you had 5 shares, sell all 5 shares, so you end up with 0 shares. Record the interest distribution on the same date for however much final interest you received.

[twj332]

transferred investment to sub-portpolio (RSP)
Recorded final interest calculation
sold 1.116840 units (bond amt. + interest)
and transferred cash to default cash account
Thanks for you help