Use Debtors and Creditors Adjustments

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In the day to day running of a business, where debtor and creditor accounts are being managed, there are times when positive/negative balances need to be adjusted to reflect the reality of a situation. This can cover adjustments from minor rounding issues through to writing off disputed amounts.

Consistent with Jim2 methodology, debtor and creditor adjustments are used to create double entry general ledger transactions that correctly record what is to be achieved.

Adjustments should be a rarity in any business, and can be limited using Jim2 Security Levels (allowing/disallowing users to access debtor and creditor payments).

Jim2 caters for returns from customers, returns to vendors and even prepayments, however these all deal with the actuality of either currency or stock changing hands.

There are times when debtor or creditor balances need to be adjusted only. This is the appropriate time to use the debtor or creditor adjustments.

The first rules to remember are the most important:

▪to increase the balance outstanding, use adjust up

▪to decrease the balance outstanding, use adjust down.

This applies to positive and negative balances for both debtors and creditors.

▪Adjusting down will create a credit that can then be applied to reduce a current balance.

▪Adjusting up will effectively create a type of invoice/purchase that then needs to be paid.

The next rule to remember is that debtor and creditor adjustments, whether they are up or down, do not represent COGS or stock value, and need to be allocated accordingly to an expense or income account in the general ledger.

Jim2 will prompt to allocate the adjustment to a general ledger account, and create a journal to balance the transaction.

Further information

Accounts Security

Account Inquiry

Clear the Historical Balancing Account

Suggested End Of Month Procedures

End of Financial Year

Enter a Capital Asset