Seraf enables you to record interest related to Promissory Notes, Convertible Notes and Compulsory Convertible Debentures (CCDs). You can record Accrued Interest and Interest Paid in cash or stock as individual transactions.
For each debt instrument that you hold, you can record specific details in the debt round about the terms of the loan itself, such as the maturity date, interest rate, frequency of the interest calculation, whether the interest is added to the principal balance (cumulative), whether the interest increases the cost basis of the investment, if it converts to cash or stock, and the discount rate.
Recording accrued interest is a two-part process since you first need to be sure the terms are added at the round level before you can record a transaction for accrued interest.
Although most fields in the debt round are simply for your own reference, there are a couple entries that affect how the principal amount and cost basis of your debt are calculated, and which are worth noting.
For each debt round, in the field for Interest Type, make your entry based on the following information:
- Cumulative - choose this entry, if you'd like for the value of your interest accrual to be added to the principal amount before calculating interest for the next period. Interest will be compounded. This will result in an increase in the principal balance as the interest in capitalized.
- Non-Cumulative - choose this entry, if you'd like for the value of your interest accrual NOT to be added to the principal amount before calculating interest for the next period. Interest in non-compounding. This will result in no change to the principal balance.
- Accrued Interest Increases Basis - choose this entry with or without cumulative or non-cumulative interest if you'd like for the cost basis of the investment to increase by the amount of accrued interest.
If you are uncertain about the terms of your note and interest, leave the Interest Type field blank, and the system will assume it is non-cumulative and the amount of accrued interest will not adjust the cost basis or principal amount of your investment.
To record accrued interest:
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Add a round with a security type of Convertible Note, Promissory Note or CCD, or edit an existing round.
- Enter as many of the fields as you wish.
- Refer to the above explanation, as needed.
- Add a transaction for Accrued Interest.
- Select the Investor / Investment Account or Fund name, depending on your account type.
- Select the Company.
- Select the Round of Investment (the note round to which the interest pertains).
- Select "Accrued Interest" for the Transaction Type.
- Enter the Date the interest accrued.
- Enter the Accrued Interest amount.
- Enter a Memo with any important notes related to the Transaction.
- Save your entry.
- If an Enterprise customer, update calculations.
*Note that if you use the import template to record an Accrued Interest transaction, you should enter the amount of Accrued Interest in the Principal Sold or Redeemed column, until further notice.
To see a summary of accrued interest, go to the Investment tab of the company record. If you've already entered your note or CCD purchase, then you'll see the accrued interest listed along with it.
Learn how to record interest paid.
Learn how to calculate how much interest you earned.
Learn how to record a note conversion.
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