# Accounting & Settlement in LYPay

## **Accounting & Settlement in LYPay**

### **Overview**

LYPay enables instant fund transfers between financial institutions and customers while ensuring proper financial accounting and settlement. This section details the **accounting schema, general ledger (GL) entries, and settlement mechanisms** for **intra-bank and inter-bank** transactions.

The accounting schema ensures that each transaction is properly recorded, classified, and settled, maintaining the financial integrity of participating institutions.

### **1. Financial Accounts**

Each LYPay transaction involves multiple financial accounts, including:

* **Payer’s account (customer account)**
* **Beneficiary’s account (customer account)**
* **Bank General Ledger (GL) accounts**
* **Settlement & reconciliation accounts**
* **Fee distribution accounts (banks and service providers)**

### **2. Intra-Bank Transfers** (Within the same bank)

In intra-bank transfers, funds move between accounts within the same financial institution.

#### **2.1. Standard Intra-Bank Transfer**

Example: A user transfers **1,000 LYD**, and a total **charge of 10 LYD** is applied.

| **Transaction Type**    | **Description**                 | **Amount (LYD)** | **Debit**       | **Credit**             |
| ----------------------- | ------------------------------- | ---------------- | --------------- | ---------------------- |
| **Payer Account**       | Deducting transfer amount & fee | 1,010            | Payer’s Account | Bank GL                |
| **Bank GL**             | Allocating fee for settlement   | 10               | Bank GL         | Fee Settlement Account |
| **Beneficiary Account** | Crediting the transfer amount   | 1,000            | Bank GL         | Beneficiary’s Account  |

#### **2.2. Reversal of Intra-Bank Transfer**

If the transaction is reversed using the reference number:

| **Transaction Type**       | **Description**           | **Amount (LYD)** | **Debit**              | **Credit**      |
| -------------------------- | ------------------------- | ---------------- | ---------------------- | --------------- |
| **Beneficiary Account**    | Reversing transfer amount | 1,000            | Beneficiary’s Account  | Bank GL         |
| **Fee Settlement Account** | Reversing charged fees    | 10               | Fee Settlement Account | Bank GL         |
| **Bank GL**                | Crediting original payer  | 1,010            | Bank GL                | Payer’s Account |

#### **2.3. Settlement of Fees**

Fees are distributed among different parties:

| **Transaction Type** | **Description**                   | **Amount (LYD)** | **Debit**      | **Credit**             |
| -------------------- | --------------------------------- | ---------------- | -------------- | ---------------------- |
| **Fee Settlement**   | Allocating bank’s share           | 5                | Fee Settlement | Bank Revenue Account   |
| **Fee Settlement**   | Allocating service provider share | 5                | Fee Settlement | Payment Switch Account |

### **3. Inter-Bank Transfers** (Between two banks)

Inter-bank transfers involve movement of funds between two different financial institutions.

#### **3.1. Standard Inter-Bank Transfer**

Example: A user at **Bank A** sends **1,000 LYD** to a beneficiary at **Bank B**, with a total **charge of 10 LYD**.

| **Transaction Type** | **Description**                 | **Amount (LYD)** | **Debit**       | **Credit**             |
| -------------------- | ------------------------------- | ---------------- | --------------- | ---------------------- |
| **Payer Account**    | Deducting transfer amount & fee | 1,010            | Payer’s Account | Bank A GL              |
| **Bank A GL**        | Transferring amount to Bank B   | 1,000            | Bank A GL       | Bank B GL              |
| **Bank B GL**        | Crediting beneficiary’s account | 1,000            | Bank B GL       | Beneficiary’s Account  |
| **Bank A GL**        | Allocating fees for settlement  | 10               | Bank A GL       | Fee Settlement Account |

#### **3.2. Reversal of Inter-Bank Transfer**

If the transaction is reversed:

| **Transaction Type**       | **Description**            | **Amount (LYD)** | **Debit**              | **Credit**      |
| -------------------------- | -------------------------- | ---------------- | ---------------------- | --------------- |
| **Beneficiary Account**    | Reversing credited amount  | 1,000            | Beneficiary’s Account  | Bank B GL       |
| **Fee Settlement Account** | Reversing transaction fees | 10               | Fee Settlement Account | Bank B GL       |
| **Bank B GL**              | Returning funds to Bank A  | 1,010            | Bank B GL              | Bank A GL       |
| **Bank A GL**              | Crediting payer’s account  | 1,010            | Bank A GL              | Payer’s Account |

#### **3.3. Inter-Bank Fee Settlement**

Fees are allocated among participating entities:

| **Transaction Type** | **Description**                   | **Amount (LYD)** | **Debit**      | **Credit**             |
| -------------------- | --------------------------------- | ---------------- | -------------- | ---------------------- |
| **Fee Settlement**   | Allocating Bank A’s share         | 2.5              | Fee Settlement | Bank A Revenue Account |
| **Fee Settlement**   | Allocating Bank B’s share         | 2.5              | Fee Settlement | Bank B Revenue Account |
| **Fee Settlement**   | Allocating service provider share | 5                | Fee Settlement | Payment Switch Account |

### **4. Key Takeaways**

✔️ **Proper ledger entries** ensure transparency in **transaction recording**.\
✔️ **Fee settlement ensures fair revenue distribution** between banks and service providers.\
✔️ **Reversals follow structured accounting processes** to maintain transaction integrity.\
✔️ **Banks must regularly reconcile accounting entries** to ensure accuracy.

***

#### **Contributors to this Document**

This accounting schema was prepared by:

* **Abdulkhalik Alatrash**
* **Esra Endisha**


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