How to Record Promissory Notes / Security Documents as Off-Balance Sheet in ERPNext?

ERPNext Accounting
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Hi everyone,

I’m looking for guidance on how to properly record and track security documents—such as promissory notes, checks held as guarantee, or similar instruments—in ERPNext. These documents are purely for control purposes and do not represent actual assets or liabilities in the balance sheet, nor should they affect the Profit & Loss statement.

Specifically, I’m seeking advice on:

How to set up a control (off-balance sheet) account in ERPNext for promissory notes or security documents—should it be created under a specific Root Type (e.g. Liability) with a certain Account Type (e.g. Payable or Temporary)?

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Hi @sfarbod

You should try Bank Guarantee doctype as it does not impact GL and can serve the purpose of Promissory Note.

https://docs.frappe.io/erpnext/user/manual/en/bank-guarantee

ERPNext Handles This;

  • Out-of-the-box, ERPNext records and tracks BGs but does not automatically hit the GL except for margin money and bank charges.
  • You can link BGs to Sales Orders / Purchase Orders for better contract compliance.

Further talking about GL Accounts under Chart of Accounts, account type of each one infact determines the behavior of how the GL is going to be reacting during Recording Phase. Since there is no GL hit as far as BG is concerned, To reflect Temporary liabilities, some companies create a custom account group “Contingent Liabilities” and manually book entries if they want it visible in reports.

Apart from all above, the Payment Request can also help communicate or chase payments based on Invoices as well.

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Hi @ahsantareen,

Thank you very much for your clear explanation and for pointing me towards the Bank Guarantee doctype—this seems to cover a good part of my requirement.

One additional point: since for my case the movement of security documents (e.g., when receiving or returning promissory notes) is important to track, I would also like to define a control account (contingent account) just to monitor turnovers, without impacting the Balance Sheet or P&L.

From your experience, what would be the best practice to set this up in ERPNext? Should I create a custom account group such as “Contingent Liabilities” (under Liability root type) and then use that for manual entries, or would you suggest a different approach for handling these purely off-balance-sheet records?

Thanks again for your helpful guidance :pray:

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@sfarbod

You can rename Bank Gurantee doctype as Promissory Note / Security Document as per your likings.

Making this docytpe Accounting Dimension will also help you to tag all your JVs with respective Notes and all accounting / Financial Reports will have a filter for better reporting.

Generally a temporary Liability account serve the purpose of Provisions efficiently.

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