Interest concepts and calculations
How remoteEaze counts days, calculates interest, applies controls, and turns accruals into postings.
Interest configuration determines how remoteEaze converts an annual rate into an amount for a specific balance and period. The selected convention changes the financial result, so configure it with the accounting and product teams.
The basic calculation
For a flat annual rate, the underlying calculation is:
Interest = Principal × Annual Rate ÷ 100 × Day-count fraction
The Principal is the applicable balance or schedule balance. The day-count fraction depends on Interest Basis.
Interest Basis
| UI option | How remoteEaze calculates the day-count fraction |
|---|---|
| Actual/360 | Actual calendar days divided by 360. |
| Actual/364 | Actual calendar days divided by 364. |
| Actual/365 | Actual calendar days divided by 365. |
| Actual/Actual | Actual calendar days divided by 365 or 366 for the year containing those days. A period crossing a year boundary is split by year. |
| 30/360 | US 30/360 day adjustments, then division by 360. |
| 30E/360 | European 30/360 adjustments. A day numbered 31 is treated as day 30, then the result is divided by 360. |
Worked Actual/360 and Actual/365 example
For a balance of 100,000 at 12 percent for 31 actual days:
| Basis | Calculation | Interest before rounding |
|---|---|---|
| Actual/360 | 100,000 × 12% × 31 ÷ 360 | 1,033.3333 |
| Actual/365 | 100,000 × 12% × 31 ÷ 365 | 1,019.1781 |
Actual/360 produces more interest because the same 31 days are divided by a smaller year denominator.
Flat Rate, Band, and Level
- Flat Rate applies one configured rate to the full applicable balance.
- Band selects the one range containing the balance and applies that range's rate or amount to the full balance.
- Level applies each tier progressively to the portion of the balance within that tier.
Bands must be ordered, non-overlapping, and complete for the range the policy is expected to process.
Debit and credit interest
An Account Condition can configure two independent sides:
- Debit Interest applies when the account is on the debit side, such as a loan or overdraft balance. Accrual uses an Asset receivable Product and an Income Product.
- Credit Interest applies when the account is on the credit side, such as an eligible savings or deposit balance. Accrual uses an Expense Product and a Liability payable Product.
Leaving a side without rate tiers disables interest for that side.
Balance, compounding, and controls
Daily Balance is the currently operational balance basis. Each accrual uses the applicable daily balance and configured day-count convention.
When compounding is enabled, eligible accrued interest can become part of the base used by a later calculation. When it is disabled, interest is calculated without adding accrued interest to that base.
The configuration can also apply:
- a minimum amount below which the calculated amount is raised;
- a maximum amount above which it is capped;
- a de-minimis amount below which it is treated as zero;
- inclusive or exclusive debit-interest tax;
- credit-interest withholding applied to the gross amount at capitalization.
Accrual, posting, and capitalization
Accrual calculates and records interest for the business date. Posting or capitalization moves the accumulated amount through configured Transaction Codes and Products. These are separate events and may occur on different schedules.
Interest accrues daily. Posting frequency controls when accrued debit or credit interest is moved to its configured accounting destination. When Use Working Day is enabled, a non-working posting date is moved using the chosen previous or next working-day rule.
COB performs the operational accrual and scheduled posting steps. Previews and loan or Fixed Deposit schedules may show rounded amounts before ledger posting. The posted batch remains the accounting record.
Loan schedule methods
Loan Repayment Policies distinguish two schedule methods:
- Equal Installment converts the annual rate to a normalized periodic rate and produces a fixed installment, subject to final-row rounding. For Actual/Actual, this periodic conversion uses a 365.25 long-run year.
- True Daily (Variable) calculates each schedule period from its actual start and end dates. Actual/Actual therefore uses exact 365-day and 366-day year portions. Period interest can vary with the number of days.
These methods currently use different conversions. Use True Daily when the exact days in each period must determine schedule interest. Use Equal Installment when a stable periodic installment is the governing product rule.
Continue with Account configuration, Lending configuration, and Fixed Deposit configuration.