Divisional Loan Accounts

The divisional loan account was introduced as part of the divisional system in JobBag to record where one division owes money to another division. This is a system account that JobBag uses when it recognises a situation where this applies.

With the divisional system it is easy for one division to handle something for another division which indirectly results in the second division “owing” money to the first division. A simple example for this is where one division “owns” a bank account and receives money in relation to an invoice for another division.

Often head office owns the bank accounts for a company but the individual divisions invoice the clients creating this situation. Without the loan account once the invoice is receipted it’s value “disappears” from the balance sheet for the division that issued the invoice while the amount “reappears” on the balance sheet for head office in the form of a debit on the bank account. This looks very bad for our poor division. The loan account rectifies this by crediting the loan account for the amount being receipted on the head office division and debiting the loan account on the division the invoice was related to.

Please note: If foreign currencies are involved it is important that the divisional loan account has a separate revaluation account assigned to it.