How Ledgers Work

Nautical's ledger system is based on double-entry accounting, which tracks a chart of ledgers debited and credited through transactions in your marketplace. This page outlines the key components for understanding the ledger system.

Data model

The following data model ensures that each financial event is recorded and balanced for precise financial records:

• Ledger: A specific account where transactions are recorded. For example, the "Sales Tax" account records all transactions related to sales tax charged on an order.
• Ledger entry: The individual record within a ledger indicating a single debit or credit transaction. For example, if $100 of sales tax applies to an order, a ledger entry would credit the "Sales Tax" ledger with $100.
• Journal entry: A grouping of ledger entries that form a single balanced transaction, documenting the entire financial event. Developers can retrieve journal entries using Nautical's API. For example, for an order totaling $1,100, a journal entry would include a debit to "Customer Receivable" and credits to the "Deferred Revenue" and "Sales Tax" ledgers, respectively.

Ledger accounts

The following accounts track transactions in the ledger system:

Account	Type	Normal Balance	Description
Customer Receivable	Asset	Debit	Tracks the amount that buyers owe to the marketplace for orders with uncaptured payments.
Deferred Discounts	Contra revenue	Debit	Tracks discounts applied to product sales that have not accrued yet.
Deferred Sales Revenue	Revenue	Credit	Tracks revenue from product sales that have not accrued yet.
Deferred Shipping Revenue	Revenue	Credit	Tracks revenue from shipping fees that have not accrued yet.
Foreign Currency Gain	Revenue	Credit	Tracks earnings or losses resulting from the exchange of foreign currencies in multi-currency transactions.
Funds - Payments	Asset	Debit	Tracks funds received from captured sales transactions, increasing the marketplace's assets.
Marketplace Commission	Revenue	Credit	Tracks revenue earned by the marketplace as a commission on product sales.
Marketplace Discounts	Contra revenue	Debit	Tracks reductions in marketplace revenue due to promotional discounts offered by the marketplace to buyers.
Marketplace Fees	Revenue	Credit	Tracks fees collected by the marketplace, including order and shipping fees when the marketplace accrues shipping.
Refunds	Contra revenue	Debit	Tracks reductions in revenue due to refunds.
Sales Tax	Liability	Credit	Tracks sales tax as a liability the marketplace must remit to the tax authority.
Seller Payable	Liability	Credit	Tracks the cumulative amount the marketplace owes sellers for completed transactions.
Seller Payout Disbursement	Contra asset	Credit	Tracks payments that the marketplace has made to sellers against their payout balance.

Account types

The account types used in our ledger system are based on standard account types used in accounting, specifically:

Type	Description
Asset	Asset accounts track the financial value of resources a company owns, such as the funds captured with a payment processor like Stripe.
Liability	Liability accounts track the debts a company has incurred, detailing what it owes to other parties.
Revenue	Revenue accounts track the income a company earns from its business operations.
Contra	Contra accounts are used to decrease the value of their corresponding main accounts, and their balances are netted against these main accounts. Unlike the normal balance of their associated accounts, contra accounts have the opposite balance type. For instance, if a revenue account typically has a credit balance, a contra revenue account like "Discounts" would normally have a debit balance.