ctcLink Accounting Manual | 40.30.20.5 Investment Interest Distribution

Earnings from an investment portfolio, which pays dividends daily or in the monthly accounting period, are to be recorded in the month in which the dividends were earned. Bank charges and merchant fees are to be accounted for separate of interest income. The fees are typically not netted against interest income.

The earned interest portion of the investment portfolio that does not pay out dividends until the maturity date, semi-annual payment date, or other scheduled date that differs from daily or monthly is recorded as interest receivable. The posting should be made in the month in which the interest was earned.

Investment interest is to be distributed or charged to all funds with a significant positive or negative cash balance. Funds that are used for revolving purposes only, for example fund 790 (College Clearing Fund) are not to be included in the interest distribution. Fund 148 absorbs interest charges for funds that do not allow interest charges as allowable costs, like Grants (Fund 145) or Contracts (Fund 146).  If a college maintains the balance of earned indirect costs revenue, interest should be credited or charged to the balance.

Interest earnings or dividends, depending on the investment, may be reinvested without any cash received by the college. In the distributed quarterly or annual option, the interest revenue may be retained in Fund 790 until distributed.

Illustrative Entries

Reinvested interest

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
790	285	ddddd	Journal Entry	1110010	Income1	4,000.00

¹ The account used is determined by the type of investment:

• 4120010 – Interest Income from investments
• 4120030 – Dividend Income

Quarterly/Annual Distribution

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
790	285	ddddd	Journal Entry	Income1	1000199	4,000.00
149	0xx	ddddd	Journal Entry	1000199	Income1	500.00
148	0xx	ddddd	Journal Entry	1000199	Income1	300.00
Etc.	xxx	ddddd	Journal Entry	1000199	Income1	Etc.

¹ The account used is determined by the type of investment:

• 4120010 – Interest Income from investments
• 4120030 – Dividend Income

Interest earnings or dividends, depending on the investment, may be reinvested without any cash received by the college. In this option, the earned interest revenue is distributed to each fund immediately upon receipt of the interest statement.

Illustrative Entries

Reinvested interest

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
790	285	ddddd	Journal Entry	1110010	1000199	4,000.00
149	0xx	ddddd	Journal Entry	1000199	Income1	500.00
148	0xx	ddddd	Journal Entry	1000199	Income1	300.00
Etc.	xxx	ddddd	Journal Entry	1000199	Income1	Etc.

¹ The account used is determined by the type of investment:

• 4120010 – Interest Income from investments
• 4120030 – Dividend Income

Option1

Accumulate cash and accrued interest/dividends in Fund 790 and distribute the cash portion only to the funds:

Illustrative Entries

Record Cash Interest

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
790	285	ddddd	AR Direct Journal	1000070	Income1	4,000.00
790	285	ddddd	Journal Entry	Income1	1000199	4,000.00
149	0xx	ddddd	Journal Entry	1000199	Income1	500.00
148	0xx	ddddd	Journal Entry	1000199	Income1	300.00
Etc.	xxx	ddddd	Journal Entry	1000199	Income1	Etc.

¹ The account used is determined by the type of investment:

• 4120010 – Interest Income from investments
• 4120030 – Dividend Income

Record Accrued Interest

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
790	285	ddddd	Journal Entry	1010030	Income1	2,000.00

¹ The account used is determined by the type of investment:

• 4120010 – Interest Income from investments
• 4120030 – Dividend Income

At the maturity date, interest/dividend earned during the current year that was previously recorded as an account receivable should be recorded as follows:

Illustrative Entries

Record Accrued Interest Received

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
790	285	ddddd	AR Direct Journal	1000070	10100301	2,000.00

¹ Interest previously accrued was received.

Interest earned in a previous accounting period or fiscal year and received in the current period should be recorded in the same manner.

Interest earnings should be distributed to the funds based on total cash (bank cash and internal cash) balance by fund or by fund/class/department depending on the nature of the cash balances. Negative cash balances are charged interest unless prohibited by law or grant agreement.

Illustrative Entries

Cash/Revenue Distribution

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
790	285	ddddd	Journal Entry	Income1	1000199	4,000.00
149	0xx	ddddd	Journal Entry	1000199	Income1	500.00
148	0xx	ddddd	Journal Entry	1000199	Income1	300.00
Etc.	xxx	ddddd	Journal Entry	1000199	Income1	Etc.

¹ The account used is determined by the type of investment:

• 4120010 – Interest Income from investments
• 4120030 – Dividend Income

Option 2

Distribute cash and accrued interest or dividends directly to the funds based on its cash (1000070-1000160, 1000199) balance:

Record Cash Interest

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
147	2xx	ddddd	AR Direct Journal	1000070	Income1	500.00
148	0xx	ddddd	AR Direct Journal	1000070	Income1	300.00
149	0xx	ddddd	AR Direct Journal	1000070	Income1	500.00
Etc.	xxx	ddddd	AR Direct Journal	1000070	Income1	Etc.

Record Accrued Interest

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
147	2xx	ddddd	AR Direct Journal	1000070	Income1	500.00
148	0xx	ddddd	AR Direct Journal	1000070	Income1	300.00
149	0xx	ddddd	AR Direct Journal	1000070	Income1	500.00
Etc.	xxx	ddddd	AR Direct Journal	1000070	Income1	Etc.

¹ The account used is determined by the type of investment:

• 4120010 – Interest Income from investments
• 4120030 – Dividend Income

At the maturity date, interest and dividends earned during the current year that was previously recorded as an account receivable should be recorded as follows:

Illustrative Entries

Record Accrued Interest Received

Fund	Class	Dept	Method	Acct DR	Acct CR	Amount ($)
147	2xx	ddddd	AR Direct Journal	1000070	10100301	500.00
148	0xx	ddddd	AR Direct Journal	1000070	10100301	300.00
149	0xx	ddddd	AR Direct Journal	1000070	10100301	500.00
Etc.	xxx	ddddd	AR Direct Journal	1000070	10100301	Etc.

¹ Interest previously accrued was received.

Interest earned in a previous accounting period or fiscal year should be recorded in the same manner.