Finance charge transactions

On the release of each document with charges, the system generates a batch of transactions that update the cash account, the customer receivables account or supplier payable account, and the general ledger expense accounts selected to accrue charges of the respective entry types (specified as an offset accounts).
The system behaviour differs depending on the workspace you use to record finance charges or the document for which you add charges.

When you release a document with charges in Supplier ledger workspace, the system generates a batch of transactions that update the cash account, the supplier payable account, and the general ledger expense accounts specified as an offset accounts.
Accounts are affected as shown below.

Account Debit Credit
(Bank) cash account Payment amount 0.0
Supplier ledger account 0.0 Payment amount
(Bank) cash account 0.0 Charge amount
Bank charges and fees (expense account) Charge amount 0.0

You can define how the system should record finance charges for the payments made in Customer ledger based on whether you select the Deduct from payment check box for the particular entry type in the Entry types (CA203000) window, as described below.

If the bank deducts the amount of charges from the payment amounts and displays only the resulting amounts on the statements, select the check box for the entry type.

For example: When you release a Customer ledger payment, the system generates the following transactions (this example displays only the basic transactions; for the complete list of possible transactions for a Customer ledger payment, see: About release of payments and prepayments).

Account Debit Credit
(Bank) cash account Payment amount– Charge amount 0.0
Customer ledger account 0.0 Payment amount
Bank charges and fees (expense account) Charge amount 0.0

If the financial institution presents the charges as separate transactions on its statements, you clear the Deduct from payment check box for the appropriate entry types.

The sample batch transactions for a customer ledger payment are shown in the following table.

Account Debit Credit
(Bank) cash account Payment amount 0.0
(Bank) cash account 0.0 Charge amount
Customer ledger account 0.0 Payment amount
Bank charges and fees (expense account) Charge amount 0.0

For funds transfers, the system generates a batch of transactions that update the source cash account, the destination cash account, and the genera ledger expense account; the batch generates separate genera ledger transactions for each registered expense.

Accounts are affected as shown below.

Account Debit Credit
Source cash account 0.0 Transfer amount
Destination cash account Transfer amount 0.0
Cash account (specified for registering expense) 0.0 Expense amount
Bank charges and fees (expense account) Expense amount 0.0

Once the deposit is released, the system generates a batch of deposit-associated transactions to transfer the payment amounts from clearing accounts to the bank account, and to post the bank charges incurred for the deposit as expenses.

The total amount of the bank charges will be deducted from the deposit amount.
Accounts are affected as shown below.

Account Debit Credit
(Bank) cash account Deposit amount– Charge amount 0.0
Clearing account 0.0 Payment 1 amount
Clearing account 0.0 Payment_2 amount
Clearing account 0.0 Payment_N amount
Bank charges and fees (expense account) Charge amount 0.0

To indicate to the system that bank charges should be posted as separate transactions in the batch, before you release the deposit, select the Separate charges check box on the Financial details tab of the Bank deposits (CA305000) window.

In this case, accounts are affected as shown below.

Account Debit Credit
(Bank) cash account Deposit amount 0.0
(Bank) cash account 0.0 Charge amount
Clearing account 0.0 Payment_1 amount
Clearing account 0.0 Payment_2 amount
Clearing account 0.0 Payment_N amount
Bank charges and fees (expense account) Charge amount 0.0