Booking The Principal Amount Using An Adjustment
When a loan contract is activated (i.e., when its status changes from pending start to active), an adjustment is created to book the principal amount. If the customer takes out a loan of 10,000, the adjustment's financial transaction looks as follows:
Event | GL Accounting | Effect On Current Balance | Effect On Payoff Balance | Current Balance | Payoff Balance |
---|---|---|---|---|---|
Loan contract is activated (and an adjustment is created to book the principal) |
Long Term Loan Receivable 10,000 Cash <10,000> |
0 | 10,000 | 0 | 10,000 |
This adjustment is issued if:
- The contract's contract type indicates a special role of Loan.
- The loan contract's Total Amount to Bill contains an amount (i.e., the loan amount).
- The adjustment type has been set up as follows:
- The adjustment type's distribution code should reference the GL account to credit (e.g., Cash).
- The adjustment type's FT algorithm reference Payoff Amt = Adj Amt / Current Amt = 0 (booking principal only impacts a customer's payoff balance).
Note that because this financial transaction doesn't have a current amount (the customer doesn't actually owe a current amount yet), there is no need to book anything to the short-term receivables distribution code.