Creditors and Debtors

Practical tips to manage your personal finance effectively. Please share your suggestions with mmex community.

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benko
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Creditors and Debtors

Post by benko »

How is this handled ?. Is it as categories, Assets or Accounts ?.
MoneyMagic
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Re: Creditors and Debtors

Post by MoneyMagic »

I set up a 'Borrowed/Lent' account for recording borrowed money (creditors) and lent money (debtors).

Borrowed amounts are entered as minus figures, because the money isn't mine and should be deducted from my net worth. Lent amounts are entered as plus figures, because the money is mine, even though I haven't received it back yet.

I only reconcile a transaction on this account when it has been repaid, and at that point I enter a second transaction to zero the original transaction.

In order to keep reports accurate, all transactions in this account are entered as TRANSFERS to or from one of my other accounts, NOT deposits or withdrawals; this is because it is only a temporary transfer of funds that will be repaid, not an income or expense. I use the comments box to record the payee details. (The only time I would enter a deposit or withdrawal in this account is if I write off a debt I'm owed, or if a creditor lets me off a debt I owe - but this hasn't happened yet :lol: )
thiruma71
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Re: Creditors and Debtors

Post by thiruma71 »

Create an account in the name of the creditor or Debtor.

If you are making a payment to debtor, 
Say XYZ is your debtor, Create an account with name "XYZ"
You might be paying your debtor from your bank account, say "1234" the account might already have been created .
Now create a transaction with type "Transfer' from Account  "1234" to "XYZ".
The balance will be updated in both your bank account and debtor account.
If you are taking credit, do the reverse.

Create as many debtor/creditor accounts as you want.
The advantage is you always have a track of account wise position of outstanding from each of your debtor and creditor.
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