As described in MIFOSX-2093, the current accruals functionality is accruing interest in line with the schedule, regardless of whether the loan is prepaid or not. Therefore there is a situation whereby the actual payments will be booked into the Income Receivable (asset) account, for income that has not yet been accrued.
From an accounting and transparency perspective it should be better to track these prepaid amounts separately in a Liablity account, Prepaid Interest Income.
a) when interest is received in advance:
Debit - Fund source
Credit – Interest Received in Advance
b) On the due date:
Debit – Interest Received in Advance
Credit – Interest Earned