Georgia - Pro Rata Adjust

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Georgia - Pro Rata Adjust

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The “Pro-rata adjust” transaction is only used in Georgia, and is only used when you write off an account and you plan on pursuing any deficiency balance with that customer.  Case law (see below) in Georgia states that you cannot use the Rule of 78’s method to calculate any deficiency balance owed to you when you write off a customer.  If you had been using the Rule of 78’s method to earn interest then accounting rules that you must continue to use that method when you write the account off.  However, this will result in a deficiency balance that would be higher than if you had been earning interest using the pro-rata method.  The Frazer system will then adjust the customers balance by the difference between if you had been earning interest using the pro-rata method and the Rule of 78’s method you are actually using.  We call this adjustment to the customers balance “Pro-rata adjust”.

 

Case law means that it is not a law on the books, but enough judges have ruled this way that it is now the de facto law.  One of the original cases that resulted in this was in 1974 in Cook vs. First National Bank.  Case number 130 Georgia Appeals 587.  Multiple cases have also been decided since then, all requiring the pro-rata method when determining a deficiency balance.