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 adjusting to reflect the reality of a situation. This can cover adjustments from minor rounding issues right 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 it is you are trying to achieve.
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 RFC, RTV and even prepayments – but these all deal with the actuality of either currency or stock changing hands.
There are times when you need to adjust debtor or creditor balances only. This is when to use the debtor or creditor adjustments.
The first rules to remember are the most important:
▪If you want the balance outstanding to increase, use adjust up.
▪If you want the balance outstanding to decrease, use adjust down.
This applies to positive and negative balances for both debtors and creditors.
▪Reducing, or adjusting down will create a credit that can then be applied to reduce a current balance.
▪Increasing, or 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 your general ledger.
Jim2 will prompt you to allocate the adjustment to a GL account, and create a journal for you to balance the transaction.
Further information: