FAQ > Explain Principal v. Non-principal v. Balances

Interest is calculated on the current balance of Principal.

If you are using a transaction based data mode you have the option of specifying whether individual transactions are subject to interest (the default) or not.

If a transaction is not subject to interest, then for want of a better generic description, it is referred to in Calin as 'Non-Principal'. This simply means that the amount is acknowledged in the calculation in that increases or decreases the total balance, but interest is not calculated on it.

However, such amounts can still affect the balance of Principal on which interest is payable. When a debtor makes payments they have to be allocated against Interest, Principal and Non-Principal. The order affects the amount of Principal due from time to time. Calin Professional lets you control that order.

The Balance at any particular time is the net result of all debits and credits, and it equals the balance of Principal plus the balance of Non-Principal.

The calculation reports clearly set out the affect of each transaction and interest calculation on these three balances.

An example use is when there are a series of invoices on which there is a contractual obligation to pay interest, plus additional amounts such as legal costs on which there is no contractual obligation to pay interest.