2501

There are several reasons why the LGLACT member balance does not ever match the G/L balance.  

When a loan is charged off, the member balance is credited (offsetting the general ledger to which the loan reports) and the offsetting entry is to a general ledger account 719.00. The loan remains an active account on the system which no longer accrues interest but does retain the ability for staff to apply payments. When payments are applied, the member account balance is reduced and the 719.00 balance is credited, increasing the contra-asset account.

If these were the only transactions affecting the account they would remain in balance at all times. However, the 719.00 account is directly affected unlike other loan control G/Ls such as a 701.00. Accounting personnel are required to fund the account outside of a member transaction by increasing G/L 719.00 through the provision for loan loss expense account. Also, if the credit union has over-funded the allowance account there are times when the balance may be reduced by a direct transfer, which actually increases the credit union's net income.

Because neither of these types of transactions are member-related, the LGLACT will never show a balanced situation between the total of the member balances and the balance in the 719.00 account.

HINT: Remember that the Trial Balance/GL Verification online inquiry tool will let you configure certain G/Ls so that they are not flagged as "out of balance" in the tool, making it easier to find accounts that truly need attention.  This is done via the Chart of Accounts configuration.