How the books work
A plain-language guide for managers who read the financial statements. You do not need to post anything by hand: every entry described here is made automatically when staff record their normal work.
Double entry in one paragraph
Every transaction is recorded in at least two accounts, and the amounts on each side always match. When a borrower repays, cash goes up and the amount the borrower owes goes down by the same total. Because both sides always match, the Trial Balance totals agree and the Balance Sheet balances. If either ever shows Out of balance, something has gone wrong and your administrator should be told.
The two sides are called debit and credit. You see them as columns on the Trial Balance and the GL Account Statement. As a rule of thumb: a debit increases what the organisation owns and its expenses; a credit increases what it owes, its capital and its income.
The account groups
Each account has a four-digit code. The first digit tells you which group it belongs to. The list below shows the accounts most organisations have. Your organisation's list is on the GL Account Statement report.
| Codes | Group | Main accounts | Appears on |
|---|---|---|---|
| 1000s | Assets - what the organisation owns or is owed | Cash / Mobile Money, Bank, Loan Receivable, Fee Receivable | Balance Sheet |
| 2000s | Liabilities - what it owes to others | Savings Payable (money held for savers) | Balance Sheet |
| 3000s | Equity - the owners' stake | Owner's Equity / Capital, plus computed retained earnings | Balance Sheet |
| 4000s | Income | Interest Income, Fee Income (Registration, Enrollment, Service), Penalty Income | Profit & Loss |
| 5000s | Cost of funds - what it pays for money it holds | Interest Expense - Savings | Profit & Loss |
| 6000s | Operating expenses - the cost of running the business | Staff costs, Rent and utilities, Transport and travel, Other operating expense, and others | Profit & Loss |
Interest paid to savers (5000s) is kept apart from running costs (6000s) on purpose, so the Profit & Loss shows the margin between interest earned on loans and interest paid on savings.
Where everyday activity lands
| What staff record | What goes up | What goes down |
|---|---|---|
| Loan disbursed | Loan Receivable | Cash |
| Collection received | Cash (the full amount) | Loan Receivable (the principal part) |
| Penalty Income, Interest Income (the penalty and interest parts) | ||
| Savings Payable (any part that went to savings) | ||
| Fee charged to a client | Fee Receivable, and the matching Fee Income | |
| Fee paid in cash | Cash | Fee Receivable |
| Fee taken from savings (depending on your organisation's settings) | Savings Payable and Fee Receivable | |
| Savings top-up, opening deposit or Savings Club contribution | Cash and Savings Payable | |
| Savings withdrawal or Savings Club payout | Savings Payable and Cash | |
| Monthly Savings Club interest | Interest Expense - Savings and Savings Payable | |
| Bank deposit (Cash Management) | Bank | Cash |
| Operating expense (Cash Management) | Other operating expense | Cash |
Three things that often surprise people:
- Interest is counted as income when it is collected, not when it falls due. A loan in arrears adds nothing to Interest Income until the borrower pays.
- A fee is income as soon as it is charged. The client then owes it (Fee Receivable) until they pay.
- Savings are not the organisation's money. Every amount clients save sits in Savings Payable, a liability, because the organisation owes it back. Savings Club interest increases that debt and is an expense, even though no cash moves.
Following a figure back to its source
- Find the account on the Trial Balance or Balance Sheet.
- Open the GL Account Statement for that account and the period you are interested in.
- Each line shows the date, a description (for example "Collection of ..." or "Payout from ...") and a reference you can match to a receipt or a client's record.
For cash specifically, the Cash book tab on the Cash management screen gives the same detail one day at a time.