Processing Charge-Off's in ASPIRE v5

Processing Charge-Off's in ASPIRE v5

Charge-Offs

Charging off a Lease or a Loan in ASPIRE is a straightforward process although there are a couple different methods and options to do so.  There are two ways to process a Loan charge-off.  The first way uses a contract modification and the other way uses a rewrite type.  There are subtle differences between the two methods.  Leases will always utilize a contract modification.  A global setting controls the variability for loan Charge-Off’s:


Loans

Contract items for charge offs are system defined so users do not need to create a new contract item for them.  The only other configuration for these items are the interface accounts.  Once they are configured, open the contract > Contract Explorer > Main.  Select Rewrite Type > Contract Modification and then Charge-Off for the reason code if applicable.  Go into the Financing and Adjustments tab and add a non-financed contract item.  Using the contract modification allows for partial charge-off to principal.  The value field will default in the outstanding principal but it can be adjusted as necessary. 



Charging off though re-write type requires the configuration change in the first screenshot.  Once this has been updated, rewrite type becomes available.  Simply select a Reason Code, Effective Date, and hit Post.  The contract status will change to Charge-Off using the rewrite type.



Loans – Journal Entries

Below are examples of Journal Entries based on the Charge-Off type for the Loan and what it looks like if the contract continues to be serviced. 

Contract Modification

Booking

DR. Principal

100,000

CR. Notes Payable

100,000

Charge-Off

DR. Charge-Off

100,000

CR. Write-Off Reserve

100,000

 

DR. Current Due - Loan

4,600

CR. Interest Income - Loan

4,600

Cash Posting

DR. Cash

1887.1

CR. Recovery - Loan

1887.1

 

Re-write Type

Booking

DR. Principal

100,000

CR. Notes Payable

100,000

Charge-Off

DR. Charge-Off

104,600

CR. Interest Income - Loan

4,600

 

 

 

CR. Principal

100,000

Cash Posting

DR. Cash

1887.1

CR. Recovery - Loan

1887.1

 

Leases

For leases, the process is like the loan example with the contract modification.  There are system defined contract items for Fee, lease, Residual, and Sales Tax Receivable.  Select any one of these to charge-off the respective amount.  The system will default the outstanding amount into the field but this can be changed as in the loan example.



Below are the Journal Entries that would be expected in ASPIRE.

Booking

DR. Contract Receivable

90,000

CR. Unearned Income

5,000

 

DR. Residual

10,000

CR. Accounts Payable

95,000

Charge-Off

DR. Charge-Off

90,000

CR. Write-Off Reserve

90,000

 

DR. Unearned Income

3,000

CR. Contract Receivable

3,000

Cash Posting

DR. Cash

1500

CR. Contract Receivable

1500

Another Example of Loan Charge-Off Journal Entries





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