Current Balance versus Payoff Balance

CAUTION: If you do not understand the difference between payoff balance and current balance, refer to Current Amount versus Payoff Amount.

The current balance on a deposit contract contains the amount of the deposit that has been billed, but not paid. The payoff balance on a deposit contract contains the amount of deposit being held. The payoff balance is a negative number because your company owes this money to the customer.

The financial ramifications of a deposit contract are predictable (if you're an accountant).

The following table indicates the payoff and current balance when the financial transactions are created for the respective events:
Event GL Accounting Arrearage Rule Effect On Payoff Amt Effect On Current Amt Payoff Balance Current Balance
Deposit billed N/A - the GL is not affected when a deposit is billed $100 starts aging 0 +100 0 100
Payment received

Cash 100

Deposit Payable <100>

 $100 relieved accordingly -100 -100 -100 0
Interest calculated

Interest Exp 5

Deposit Payable <5>

 N/A -5 0 -105 0
Note: It's important to be aware that everything that is shown in this table is controlled by how you set up the deposit contract type's bill segment type, payment segment type, and adjustment types. Refer to Contract Type Controls Everything for how to do this.

The following points describe the events in the above table:

  • Deposit billed. In this example, the customer is billed for $100 deposit.

    • The customer really thinks they owe the billed amount, $100. Therefore, current amount is affected. However, if the customer was to cash out, they wouldn't owe your organization anything, therefore payoff amount is not affected.

    • Notice that the GL is not affected when the deposit is billed. This is because most organizations do not show a receivable for billed deposits (as it's not a true receivable).

    • Because current amount changed by $100, arrearage history is affected accordingly.

  • Payment received. With any luck, the client will pay the $100 that was billed.

    • The payment has a normal affect on the GL (debit cash, credit deposit payable). The deposit payable GL account is defined as the deposit contract type's Distribution Code.

    • The amount the customer thinks they owe decreases by $100, therefore current amount is affected by the payment amount. And, if the customer was to cash out, your organization would owe the customer $100, therefore payoff amount is affected by the payment amount.

    • Because current amount changed by $100, arrearage history is affected accordingly.

  • Interest calculated. In this example, the system calculates interest of $5.

    • The interest is posted to the GL (the interest expense distribution code is defined on the respective adjustment type).

    • The interest amount didn't affect how much the customer thinks is due them. Therefore current amount is unaffected. However, if the customer was to cash out, your organization would owe them $100 + $5 (the interest) therefore payoff amount is affected by $5.

    • Because current amount is not changed, arrearage history is not affected.