Recording purchase of bonds

English Transactions
1

Hi, I’m trying to enhance the PP manual. Regarding the processing of bond purchases, I’m having some difficulties; see Managing bonds - Portfolio Performance Manual. The options I describe in the text are from the German-language forum (Verbuchung von Anleihen) but I’m not confident they are correct, more specifically:

(1) Why does option 1 result in an incorrect performance calculation?
(2) For options 2 and 3, the effective interest payment is reduced by the portion already earned at the time of purchase. Does this not create a distorted picture of the interest evolution?
(3) Is there a specific advantage to choosing option 2 or 3?

Feedback will be greatly appreciated.

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2

OK. May be my previous question was not phrased very well. Suppose, I want to book the following purchase of a bond.

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How should i record the accrued interest (8.01 EUR) of the 26 days: from 2022-10-01 (maturity date) to 2022-10-27 (purchase date)?

From the German forum I thought I understood the following:
(1) increase the price of the bond (91.76%) so that the additional interest is covered.
(2) book the interest as an additional tax and refund that tax when the first interest of the bond is paid.

What are the (dis)advantages of each? Is there a better approach?

Thanks.

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