Should a CD have a positive cash balance?

droopydog53

I think there are two ways to record interest accrued for a CD. You can either do a "IntInc" entry or edit the price history. The former gives you a positive cash balance which I believe would negatively impact various reports and the latter gives you a zero cash balance.

Which one is correct? Thanks!!

Chris_QPW

A CD doesn't have a "changing price" it is always $1 per share. CD's earn interest and that is how it should be recorded.

If that CD is in a taxable account, you pay tax on the interest as it happens, not like a security where your pay on the increase in value when you sell.

splasher

What is right or wrong I can't say, but I have multiple CDs, some directly from banks and some thru Edward Jones (EJ) but still from banks.

The bank CDs look like savings accounts and accrue interest monthly and their balance steadily goes up monthly.

The CDs thru EJ show two different behaviors. Some accrue interest monthly and others accrue interest at maturity. All them have a price near $100 with an appropriate qty to get the correct total amount.

The ones that accrue monthly show income, but have a price that is slightly less than $100. The ones that pay at maturity have a price that is over $100 so that the MV reflects the amount of interest that they have "earned" so far. Both types get a new quote downloaded on days that the market is active.

To your original question, EJ shows the interest payments as "IntInc". Right or wrong, that is the way EJ does it and it seems to make sense to me.

Chris_QPW

I'm sorry I might have given the wrong information based on what @splasher said. I didn't think any CD were treated as "bonds" where they start out at less than face value and then increase in value. If you have such a security, then it would be the price that increases.

droopydog53

Thank you both for your insight! It is appreciated! I can honestly see both sides of this. My logic is that if I can't "touch" the interest or buy something else with it than I would go with the edit the price history but if that interest gets put in an account that I can withdraw it and do something else then I'd go interest income entry. I'm I off the mark?

Chris_QPW

For me the criteria wouldn't be if I can get at the money or not. All the CDs I know of you can't take the money out, short of closing the CD and paying a penalty. My focus would be on the taxes. I have two CD accounts at a bank, each month they each get an interest payment. Even though the CD term is 15 months, come the end of the year I will have to pay tax on whatever interest was paid to those accounts during the year. By recording this as monthly interest payment is easy to get the total for the year.

One the other hand, from what I looked up "bonds" can have their taxes paid each year or when they mature. So, depending on that one might choose to treat them differently.

q_lurker

I have not checked my past records, and I don’t current CDs, but I believe I typically chose to treat investment-type CD interest as reinvested interest increasing the ‘shares’ of the CD and keeping the value/share at $1.00.

For a bank-type CD, those were a specific bank savings account with a cash value ind interest recorded as increasing that value.

Editing the price/share strikes me as flaky and not properly identifying interest earned.

Chris_QPW

I have never had CD in an investment account, but @q_lurker 's approach seems like the best way to record it, provide that you aren't downloading these transactions, and the financial institution does it differently.

The biggest concern I ever have with this is being able to easily tell me what would be reported as income.

QuickUserPSP

@droopydog53 - there are two types of CDs - Bank CDs and Broker CDs.

Bank CDs are the ones that are treated as savings accounts in Quicken. You can set up a Savings Account in Quicken and it can be off line or connected with online services to your bank. It depend on what online services your bank offers. The interest is posted periodically like a savings account and is reported on a 1099-INT along with your other checking and savings accounts.

Broker CDs are purchased as an investment and can be issued by any financial institution. They have a CUSIP number and should be set up as an investment in Quicken with this CUSIP. They do have a daily price that gets downloaded from the update file from the financial institution that holds the CD. It is important to note that the CD prices do not get updated from the usual price feed like other securities.

The interest is reported on the 1099-INT and the maturity (sale) is reported on the 1099-B from your broker.

I have several broker CDs and they are all held at Wells Fargo Advisors and the daily prices for these CDs are updated from the OSU from Wells Fargo Advisors.

The initial purchase for a broker CD is similar to a bond purchase, but do not use a "Bonds Bought" transaction. Use a Buy transaction and the number of shares should be 100th of the cost or MV.

Chris_QPW

@QuickUser thanks. That is sort what I was thinking that they might be treated more like a traditional bond in an investment account. And for sure if this was in a downloaded account, I would just follow whatever the downloaded transactions gave me.

For the case where I was manually entering the transactions, then my goal would be to make it easy to see what I will be taxed on depending on how I'm going to have to pay the tax. The bottom line I think is that in a manually entered account, it is really just whatever the user likes best. There isn't really a "wrong" or "right" way.

QuickUserPSP

@Chris_QPW you are welcome. And, you are absolutely right, there are many ways it can be done on Quicken. It sometimes depends on the online capability of the FI but ultimately it comes down to user preference.