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.

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Contributors to this Document

This accounting schema was prepared by:

• Abdulkhalik Alatrash

• Esra Endisha