Most of the business operations recorded in books require the indication of the other party of the transaction – counterparty.
Counterparty is a third party entering into any contractual relationships with your company. These relationships are somehow related to the company’s business activity, for example, services received or provided, goods purchased or sold, incurrence of financial commitments, payroll accounting, cash inflow or outflow, etc.
Based on the operation, a counterparty can be your customer, vendor, employee, bank, or tax agency.
Records are kept individually for each counterparty, for this reason, the counterparty shall be indicated in the accounting entries.
Separate counterparty accounting allows to find out at any time who owes you and how much they owe you, as well as whom and how much you owe, to reconcile payments with a counterparty at any date to confirm the amount due, and to get a counterparty’s account statement over