Accounting entries and ledgers
Every payment ends as balanced ledger entries: customer accounts, nostros, and the suspense accounts that hold whatever cannot post cleanly.
L0 Explain simply
An everyday analogy: imagine every payment as a parcel that collects a signature at each handover — and then realise the signatures are the point. The parcel is fiction; the signatures are real. When you pay someone abroad, no money travels: instead, a chain of banks each writes a matched pair of entries in its own books — take from this account, give to that one — and the sum of all those pairs is the payment. Accounting is not the paperwork after the payment; it is the payment. And when an entry arrives that cannot be matched to anything — money with no explanation — it goes on a special shelf called a suspense account until someone works out whose it is. The shelf must be emptied regularly; that is a rule, not a preference.
L1 Core concepts
Every payment resolves into balanced double entries at each institution it touches. An outgoing customer transfer, at its simplest: debit the customer's account, credit the account through which the bank settles — a nostro at a correspondent, or a settlement account at the central bank or CSM. The receiving bank mirrors it: debit its nostro or settlement account, credit its customer. A nostro account is 'our account at your bank'; the same account seen from the servicing side is a vostro. Suspense accounts hold entries that cannot yet post finally — an incoming amount whose beneficiary reference fails, a return awaiting investigation. Institutions design their charts of accounts differently, but the grammar is universal: every movement lands somewhere, and unexplained money parks in suspense, briefly.
L2 Practitioner view
The practitioner's discipline is knowing which event triggers which entries, and when. Message and money move separately: an MT103 can arrive today for cover arriving tomorrow, so posting logic must decide what the customer sees in the gap. Each hop in a correspondent chain posts across its own books only — no bank writes entries in another bank's ledger — and the end-of-day MT940 statement is how the account owner learns what its correspondent actually did, feeding reconciliation. Value dates drive interest: post with the wrong value date and someone gains or loses a day of funds, which is why back-valuation exists as a repair. Suspense hygiene is audited: entries carry aging limits, named owners, and escalation when they linger — a suspense account that only ever grows is a control failure in slow motion.
L3 Technical details
A worked illustration, fully fictional: Bank Alfa in Madrid pays USD 100,000 for a customer to Meridian Bank in Singapore via its US correspondent, Nordbank New York. Bank Alfa posts: debit customer, credit its nostro at Nordbank. Nordbank posts: debit Bank Alfa's vostro, credit Meridian's vostro — both entries in its own books. Meridian posts: debit its nostro at Nordbank, credit its customer. Three institutions, three balanced pairs, one payment — and no entry anywhere until each bank's own trigger event fires. Now break it: Meridian's incoming credit references an unknown account. The funds sit in Meridian's suspense account, aged and owned, while an investigation runs; resolution is either a corrected posting or a return, each with its own entries. Trace this example until it feels boring — every real case is the same pattern wearing different clothes.
Sources & standards1
- Simplified educational illustration
Payments Signal editorial teaching models — Payments Signal
What this simplifies: The worked example uses fictional banks and omits foreign exchange, charges, screening holds, and timing differences between the message and the cover; posting trigger events and account structures vary by institution.
Used wherever diagrams, scenarios, figures, or example values are didactic constructions rather than sourced facts; every such use carries a simplifications disclosure. All people, companies, banks, and list entries in examples are fictional.
SEE THE PAYMENT MOVE
Read the steps as text
- 02ProcessingBank Alfa validates and screensBank Alfa (ordering bank)
Format and balance checks plus sanctions screening. Cross-border payments face stricter screening because more jurisdictions are involved.
Screening checkpoint: Outbound cross-border screening — Ordering and beneficiary parties, banks, and remittance text are screened before the payment leaves.
- 03PostingThe customer's account is debitedBank Alfa (ordering bank)
Bank Alfa books the debit and, per the charge option, any fees.
- DR Ordering customer's account at Bank Alfa — USD 250,000.00
- 05ProcessingMeridian validates and screens in the middleMeridian Bank (correspondent)
Every bank in the chain screens independently. Meridian also checks that Bank Alfa's account has cover for the debit.
- 06SettlementMoney moves across the books of MeridianMeridian Bank (correspondent)
Both Bank Alfa and Cassia hold USD accounts at Meridian. Settlement here is a book transfer in commercial bank money: Meridian debits one account it holds and credits the other.
No clearing house is involved — the correspondent's ledger is the settlement venue. This is settlement in commercial bank money, not central bank money.
- DR Bank Alfa's USD account at Meridian (vostro) — USD 250,000.00
- CR Cassia's USD account at Meridian (vostro) — USD 250,000.00
- 09ProcessingCassia validates the incoming paymentCassia Bank (beneficiary bank)
Account checks and inbound screening. Only when funds are confirmed on the nostro and checks pass is the beneficiary credited.
- 10PostingThe beneficiary is creditedCassia Bank (beneficiary bank)
Cassia credits its customer, net of any beneficiary-side charges the charge option allows.
- CR Beneficiary's account at Cassia — USD 250,000.00
Sources for this topic2
- Official requirement
Swift Standards MT (annual standards releases) ↗ — Swift · Category 9 — MT940 customer statement
Full field-level specifications live in the Swift Knowledge Centre User Handbook behind a swift.com login; content here relies on public summaries. Swift ended MT-to-ISO 20022 coexistence for in-scope cross-border payment instructions (for example MT103 and MT202) in November 2025; MT statement messages are being phased out on a separate timeline.
- Simplified educational illustration
Payments Signal editorial teaching models — Payments Signal
What this simplifies: All banks, customers, and amounts in the examples are fictional. Charts of accounts, posting trigger events, and suspense policies vary between institutions; the balanced-pairs grammar is general, the specifics are not.
Used wherever diagrams, scenarios, figures, or example values are didactic constructions rather than sourced facts; every such use carries a simplifications disclosure. All people, companies, banks, and list entries in examples are fictional.
Deepest material on this page: L3 — Technical details. Where a topic stops short of implementation depth, that is a deliberate coverage decision, not an oversight — see coverage.