Accounting Basics Every Tontine Manager Should Know

You do not need an accounting degree to run a successful tontine on Agatabo. But having a basic grasp of accounting fundamentals makes you a far more effective manager: you will read reports with confidence, catch discrepancies before they grow, and have informed conversations with auditors or board members. This guide covers the essentials — without jargon — so you can focus on serving your members.

Agatabo handles double-entry bookkeeping automatically behind the scenes. Every time you record a transaction, the platform posts the correct debit and credit entries for you. You never need to enter journal entries manually.

The Accounting Equation

Every financial statement in Agatabo traces back to one fundamental equation:

ASSETS = LIABILITIES + EQUITY

Here is what each term means in the context of your tontine:

Assets — Everything your organization owns or is owed: cash in the bank, outstanding loans to members, equipment
Liabilities — Everything your organization owes to others: member savings deposits (which you must eventually return), reserves
Equity — The net worth belonging to the group: what is left over after liabilities are subtracted from assets

Concrete example:

Category	Item	Amount (RWF)
Assets	Cash in bank	5,000,000
Assets	Loans to members	10,000,000
Assets	Equipment	1,000,000
Total Assets		16,000,000
Liabilities	Member savings	12,000,000
Liabilities	Reserves	2,000,000
Total Liabilities		14,000,000
Equity	Retained earnings	2,000,000

16,000,000 = 14,000,000 + 2,000,000 ✓ The equation must always balance. If it does not, there is an error somewhere.

Double-Entry Accounting

Every financial transaction affects at least two accounts — money always comes from somewhere and goes to somewhere. This is called double-entry accounting, and it is what makes financial records reliable. Here are three everyday examples from tontine operations:

Member Deposit
Loan Disbursement
Loan Repayment

A member deposits 10,000 RWF into their savings account.

Account	Effect	Amount
Cash (Asset)	Increases ➕	+10,000
Member Savings (Liability)	Increases ➕	+10,000

Your cash goes up because you received money. Your liability goes up because you now owe that money back to the member.

You disburse a 50,000 RWF loan to a member.

Account	Effect	Amount
Loans Receivable (Asset)	Increases ➕	+50,000
Cash (Asset)	Decreases ➖	-50,000

Cash leaves your account, but you gain an asset — the right to receive 50,000 RWF back from the member.

A member repays their 50,000 RWF loan.

Account	Effect	Amount
Cash (Asset)	Increases ➕	+50,000
Loans Receivable (Asset)	Decreases ➖	-50,000

The debt is settled — cash returns and the receivable is cleared.

The golden rule: Total debits must always equal total credits. Agatabo enforces this automatically, so your books stay balanced even if you never think about it.

Debits and Credits Simplified

The terms debit and credit confuse almost everyone at first — they do not mean “money in” and “money out” the way your debit card does. In accounting, they are simply directions: left side (debit) or right side (credit) of an account ledger. The practical rule is straightforward once you see it by account type:

Account Type	Debit Effect	Credit Effect	Example Account
Assets	Increase ➕	Decrease ➖	Cash, Loans Receivable
Liabilities	Decrease ➖	Increase ➕	Member Savings, Reserves
Equity	Decrease ➖	Increase ➕	Retained Earnings
Revenue	Decrease ➖	Increase ➕	Interest Income, Fee Income
Expenses	Increase ➕	Decrease ➖	Salaries, Bank Charges

In day-to-day Agatabo use, you rarely need to think about debits and credits directly. Focus on the balance shown on each report. Agatabo posts the correct entries automatically — the table above is useful when you want to understand why a number moved in a particular direction.

Key Financial Statements

Agatabo generates two primary financial statements. Each tells a different story about your organization.

Balance Sheet
Profit & Loss

The Balance Sheet (also called the Statement of Financial Position) shows a snapshot of your organization’s financial health at a specific date. It lists everything you own, everything you owe, and the equity that belongs to your members.Sample Balance Sheet:

ASSETS
  Cash                       5,000,000
  Loans Receivable          10,000,000
  Equipment                  1,000,000
  Total Assets              16,000,000

LIABILITIES
  Member Savings            12,000,000
  Reserves                   2,000,000
  Total Liabilities         14,000,000

EQUITY
  Retained Earnings          2,000,000
  Total Equity               2,000,000

Total Liabilities + Equity: 16,000,000

What to look for:

Are total assets growing month over month?
Is equity positive and increasing? (Your group is building wealth.)
Are loans receivable a healthy proportion of total assets?

The Profit & Loss statement (also called the Income Statement) shows revenue earned and expenses incurred over a period — a month, a quarter, or a year. It tells you whether your organization is operating profitably.Sample Profit & Loss:

REVENUE
  Interest Income            2,000,000
  Fee Income                   300,000
  Total Revenue              2,300,000

EXPENSES
  Operating Expenses           800,000
  Salaries                     500,000
  Bank Charges                  50,000
  Total Expenses             1,350,000

NET INCOME (Profit)            950,000

What to look for:

Is net income positive every period?
Is interest income growing as your loan portfolio grows?
Are expenses growing faster than revenue? (That is a warning sign.)

Cash vs. Accrual Accounting

There are two ways to decide when to record a transaction. Agatabo primarily uses the cash basis for simplicity.

Method	Record income when…	Record expense when…
Cash Basis	Cash is actually received	Cash is actually paid
Accrual Basis	It is earned (even if not yet received)	It is incurred (even if not yet paid)

Agatabo’s approach: When you record a deposit, it uses the date the cash arrived. When you record an expense, it uses the date you paid it. This keeps things intuitive. The one exception: Loan interest may accrue over time — meaning Agatabo calculates interest earned on outstanding loans even before the member makes their next payment. This gives you a more accurate picture of income as it builds.

Key Metrics to Watch

These four ratios give you a quick financial health check at a glance:

Liquidity

Formula: Cash ÷ Member Savings
Target: > 10%
Measures whether you have enough cash on hand to meet withdrawal requests. If this drops below 10%, review your loan disbursement pace.

Profitability

Formula: Net Income ÷ Total Revenue × 100
Target: > 20%
Shows what percentage of revenue becomes profit. A healthy tontine retains at least 20 cents of every franc earned.

Portfolio Quality

Formula: Loans > 30 days overdue ÷ Total Loans
Target: < 10% (PAR30)
Tracks the share of your loan portfolio at risk. Rising PAR30 is an early warning sign of repayment problems.

Return on Assets

Formula: Net Income ÷ Total Assets × 100
Target: > 5% annually
Measures how efficiently your assets are generating profit. A low ROA suggests capital is sitting idle rather than working.

Common Accounting Terms

Term	What It Means in Plain Language
Journal Entry	A record of a single transaction showing which accounts were debited and credited
Ledger	The complete collection of all accounts — the master record of every number in your financials
Closing Period	Locking a past accounting period so no one can alter historical records
Accrual	Recognizing income or an expense before the cash actually changes hands
Write-off	Removing an uncollectible loan from your books and recording it as a loss
Provision	Money set aside today for losses you expect in the future (e.g., likely bad debts)
Reconciliation	Comparing two sets of records — such as Agatabo’s cash balance and your bank statement — to confirm they match

Bank Reconciliation

Reconciliation is the practice of comparing Agatabo’s cash account balance against your actual bank statement and resolving any differences. You should do this every month as part of closing your books. Common reasons for differences:

Transactions recorded in Agatabo but not yet cleared at the bank
Bank fees that were not yet entered in Agatabo
Deposits in transit

Why it matters: Reconciliation is your primary defense against errors and fraud. If every cent is accounted for, unauthorized activity has nowhere to hide.

If your organization grows beyond 100 members or 50 million RWF in total assets, consider engaging a professional accountant for quarterly reviews. Agatabo makes their work easy by exporting complete transaction histories and financial statements in standard formats.

​The Accounting Equation

​Double-Entry Accounting

​Debits and Credits Simplified

​Key Financial Statements

​Cash vs. Accrual Accounting

​Key Metrics to Watch

Liquidity

Profitability

Portfolio Quality

Return on Assets

​Common Accounting Terms

​Bank Reconciliation

The Accounting Equation

Double-Entry Accounting

Debits and Credits Simplified

Key Financial Statements

Cash vs. Accrual Accounting

Key Metrics to Watch

Common Accounting Terms

Bank Reconciliation