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The Mutual Settlement documents can be used to register the settlements between the entity and its customers or the entity and its suppliers. Accounting for settlements with suppliers and customers is an important element in the ERP system. A settlement generally refers to agreement between two or more parties to offset debt documents so that a positive balance remains in any of the involved accounts.
Standard types of settlements between the entity and its customers or the entity and its suppliers:
- Mutual Settlement: When you need to offset the customer debt against the entity's debt to a third-party company that is affiliated with the customer.
- Customer Debt Assignment: When your entity needs to transfer the customer debt to another company that is affiliated with this customer.
- Supplier Debt Assignment: When your entity needs to transfer its own debt to a particular supplier to another company that is affiliated with this supplier.
- Customer Debt Adjustment: When your entity needs to write off the customer's specific bad debt directly to operating expenses.
- Supplier Debt Adjustment: When the entity needs to directly write off its debt to a particular supplier (who is out of business) directly to other income.
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