When a loan with a fee charged at disbursement is disbursed to savings the the journal entries happen as follows: Eg. Loan of 50,000 with 1% processing fees charged at disbursement.
- Loan Portfolio is debited by by 50,000. This is okay.
- Liability Transfer is credited by 50,000. This is okay.
- Fee income is credited with 500. This is okay.
- Loan fund source is debit with 500. This is the error, Liability Transfer should be debited.
- Savings Portfolio is credited with 49,500. This is okay.
- Liability transfer is debited with 49,500. this is okay.
As you can see the end result is that liability transfer is left with a balance with in fact it is a control account.