Due From Account

A due from account refers to an asset account in the general ledger that indicates the amount of deposits currently held at another company. The due from account is typically used in conjunction with a due to account, also sometimes referred to as intercompany receivables in the chart of accounts.

The general ledger is the centralized source that contains all the financial accounts; it contains debit and credit accounts, including the due from account, which is a debit account. A due from account holds assets in another firm’s account that can be considered as a receivable by the company that has the account. Due from accounts track assets owed to the company and are not used for the tracking of any liabilities or obligations. In the case of many businesses, due from accounts hold deposits made by customers.

In international business, the due from account can be referred to as a nostro account. Nostro accounts hold deposits made by customers in one country before being transferred to the primary due from account held by the business in their home nation, in their home currency. Nostro accounts generally hold funds in the currency native to the account's location and not the currency of the business’ home nation or bank.

While the due from account tracks money owed to the company, the due to account is used to track obligations, such as funds, that are due to another entity. The due from accounts focus on incoming assets, also known as receivables, and the due to accounts focus on outgoing assets, also called payables. The funds in a due to account are often designated for a particular purpose, such as to fulfill a debt obligation, prior to being transferred into the account

At no time should either account ever reflect a negative balance, as these accounts track known obligations. If a negative balance occurs, the most likely culprit is incorrectly entered data. If the account ever reflects a zero balance, this means there are no receivables or payables expected at that time.

The primary reason for separating the incoming and outgoing funds is for ease of accounting. This keeps all incoming payments focused in one account, and outgoing in another. Each transfer can be marked with its source or destination, and helps maintain a simplified paper trail if research is required.