Treasury bond redemption

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insall

Posted 14/08/2008 7:12:48 PM

Junior Member

Group: Forum Members
Last Login: 30/09/2008 8:42:27 PM
Posts: 3, Visits: 20

Our fund purchases Treasury bonds from the RBA and holds them to redemption. The fund receives interest on the bonds until the RBA redeems them. At the redemption date, the RBA returns the face value of the bond in cash to our bank account.

What is the best way to record the cash received from the RBA when it redeems the bonds? (There is no sale as such. The bonds simply cease to exist.)

Post #4010

MySF2

Posted 17/08/2008 7:28:00 PM

MySF Administrator

Group: Administrators
Last Login: Today @ 4:04:50 PM
Posts: 294, Visits: 391

Hi,

You will need to record a sale of the bond to make sure that it is removed from the current asset list and that the balance of its account goes to zero.

The best way to process the redemption of the bond will be to record the sale for the same price as the cost base of the bond, which will mean an inflow of cash to the bank account, but no capital gain or loss. Then, process an interest receipt for the amount of money above the cost base that was paid to you in the final amount (if it was less then this will be negative).

Regards,

MySF

Post #4012

insall

Posted 17/08/2008 9:57:22 PM

Junior Member

Group: Forum Members
Last Login: 30/09/2008 8:42:27 PM
Posts: 3, Visits: 20

Many thanks.

Post #4013

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