How the Ledger Works

Double-entry accounting sounds intimidating, but the concept is simple: every time money moves, you record where it came from and where it went. The two sides always equal each other. That's it.

The Basic Idea

Think of the ledger as a record book where every financial event gets written down as a balanced entry. If $10,000 arrives in an SPV's bank account from an investor, you write:

• Money arrived in the SPV's cash account (+$10,000)
• Investor's obligation reduced (-$10,000 -- they no longer owe this amount)

Both sides of the entry are $10,000. The entry is balanced. If someone tried to record $10,000 arriving but only $9,000 of obligation being reduced, the system would reject it -- something doesn't add up.

Debits and Credits

In accounting, "debit" and "credit" don't mean "good" and "bad." They simply mean "left side" and "right side" of an entry. Different account types have different normal sides:

You don't need to memorize this table. The system handles the mechanics. What matters is the principle: every entry has equal debits and credits.

How Common Events Are Recorded

Investor Commits to an Investment

When an investor says "I want to invest $25,000," the ledger records:

• Debit the investor's receivable account (+$25,000 -- they owe this)
• Credit the investor's capital account (+$25,000 -- their economic interest)

No cash has moved yet. This is a bookkeeping entry that establishes the obligation.

Payment Arrives

When the investor's $25,000 ACH payment completes:

• Debit the SPV's cash account (+$25,000 -- money is here)
• Credit the investor's receivable (-$25,000 -- they paid what they owed)

The receivable goes to zero. The cash account goes up. Balanced.

Wire Fee Shortfall

The investor wired $25,000 but their bank took a $15 wire fee, so only $24,985 arrived. An admin adjusts the investment amount down to $24,985:

• Debit the investor's capital (-$15 -- their economic interest decreases slightly)
• Credit the investor's receivable (-$15 -- they owe $15 less)

ACH Return

The investor's bank returns the $25,000 ACH payment. The ledger creates a reversal:

• Credit the SPV's cash account (-$25,000 -- money left)
• Debit the investor's receivable (+$25,000 -- they owe again)

This is the exact mirror of the original payment entry. The accounts return to their pre-payment state.

Overpayment

The investor sends $26,000 instead of $25,000. The ledger records:

• Debit the SPV's cash (+$26,000)
• Credit the investor's receivable (-$25,000 -- clears the full obligation)
• Credit the overpayment suspense account (-$1,000 -- parked until resolved)

The $1,000 excess sits in the suspense account until an admin decides to either keep it (increase the investor's position) or refund it.

Refund Issued

When the platform refunds $5,000 back to an investor:

• Debit the investor's capital (-$5,000 -- their economic interest decreases)
• Credit the SPV's cash (-$5,000 -- money leaves the SPV)

This is the inverse of a payment receipt. The investor's position is reduced and the SPV's cash decreases by the refund amount.

Fee Accrual

When an investor's payment is fully received and the investment is funded, the platform fee is immediately accrued as a liability -- even though no cash has moved yet. For example, if the platform fee on a $25,000 investment is $1,500:

• Debit the investor capital pool (-$1,500 -- the portion of capital earmarked for fees)
• Credit the fees payable account (+$1,500 -- the SPV now owes this fee)

This accrual happens automatically when the investment reaches "funded" status. If an investment is later refunded, the accrual is reversed. If the investment amount changes and fees are recalculated, the accrual is adjusted to match.

Fee Settlement

When a platform fee of $1,500 is actually paid out of an SPV (via a fee sweep or direct payment):

• Debit the fees payable account (-$1,500 -- the obligation is settled)
• Credit the SPV's cash (-$1,500 -- money leaves the SPV)

The fee was already recognized as an obligation when it was accrued. This entry simply records the cash leaving and clears the liability.

Capital Deployment to Portfolio Company

When the SPV wires $500,000 to the portfolio company via a disbursement:

• Debit the Portfolio Investment account (+$500,000 -- the SPV now holds an investment asset)
• Credit the SPV's cash (-$500,000 -- money leaves the operating account)

This entry is recorded automatically when the disbursement's payment settles. Until the payment completes, the ledger reflects the pre-disbursement state.

When Ledger Entries Are Created

The ledger records entries automatically whenever a financial event occurs. This includes:

• Payment completed -- when an ACH debit, wire, or other payment settles
• Payment returned -- when a previously completed payment is reversed by the bank
• Investment committed -- when a new investment is created
• Investment fully funded -- when all payments are received for an investment, the platform fee is accrued as a liability
• Amount adjusted -- when an admin changes an investment amount (wire fee shortfall, gross-up, correction), fee accruals are adjusted to match
• Refund completed -- when an outbound refund payment settles; if the investment was funded, the fee accrual is reversed
• Fee settlement completed -- when an outbound fee payment settles, clearing the fee liability
• Capital deployment completed -- when a disbursement to a portfolio company settles, recording the investment asset and reducing the SPV's cash

All of these happen automatically. There is no manual step to "record in the ledger" -- the system handles it as part of the normal workflow.

Immutability

Ledger entries are never changed or deleted. If a mistake is made, a new reversing entry is created that mirrors the original with the directions flipped. This preserves a complete audit trail -- you can always see what happened, when it was corrected, and what the correction looked like.

The Ledger as Source of Truth

Historically, SPV balances came from the payment provider -- the provider reports how much money is in each virtual account. The ledger now offers a second, independently computed balance derived entirely from the journal entries recorded on the platform.

For SPVs that have been switched to ledger-derived balances, the ledger is the authoritative source of truth. The payment provider's balance is still tracked as a cross-check, and a daily comparison job alerts the operations team if the two values ever diverge.

You can see which source is authoritative for each SPV on the Ledger Health dashboard and on each virtual account's detail page in the admin panel. A "Ledger" badge indicates the ledger is authoritative; "Provider" means the payment provider's balance is still primary.

What This Means for You

As an admin, the ledger provides:

• Confidence that every dollar is accounted for
• Visibility into the financial state of any SPV or investment at any point in time
• An audit trail that regulators and auditors can follow
• Automatic error detection -- if the numbers don't balance, the system won't allow the entry
• Independent verification -- a daily comparison between the ledger and payment provider balances ensures nothing slips through the cracks