Distinguishing the Statutory Current Account Agreement from an Open Account Relationship
In commercial practice, the expression “current account” (cari hesap) is often used to mean that all dealings between the parties are tracked in an accounting ledger. A current account agreement within the meaning of the Turkish Commercial Code, however, is a special contract in which the parties agree in writing, for a given period, to forgo claiming their reciprocal receivables separately, to record them as account items and to claim the balance resulting at the end of the period.
For this reason:
- The existence of an account such as “120 Receivables” or “320 Payables” in an accounting program does not, by itself, create a statutory current account agreement.
- The written-form requirement and the scope of the statutory current account agreement must be reviewed.
- If there is no written current account agreement, the relationship between the parties may be an open account or a continuing commercial relationship based on invoices.
- In a statutory current account, the enforceability of individual items during the account period and the balance at the end of the period are subject to different rules.
- In an open account, each invoice, delivery, payment, return and offsetting is examined on the basis of its own legal ground.
- How the receivable is described in enforcement proceedings and in the statement of claim, as a “current account,” an “open account” or specific invoices, may affect the scope of the review.
- The basis of the enforcement proceedings and the cause of action should not be left vague in a way that later changes the nature of the receivable.
Incorrect characterization may cause a loss of rights with respect to which transactions are the subject of the lawsuit, to which debt payments are to be applied, the statute of limitations, interest, the scope of the mediation application and the limits of the expert examination.
Account Period, Balance and Objection to the Current Account
In a statutory current account agreement, the difference between the receivable and debit items is determined at the end of the account period. If the account period is not regulated in the contract or by commercial custom, the supplementary provisions of the law may apply. The sending of the schedule showing the balance and whether it is objected to may have special consequences for acceptance of the balance.
With respect to an objection to the balance statement within the meaning of the Turkish Commercial Code:
- Whether the current account agreement is written and valid
- The start and end dates of the account period
- The content of the statement and which items it covers
- The authority to represent of the persons sending and receiving the statement
- Proof of the date the statement was received
- The one-month objection period provided by law
- The form and content of the objection and its delivery to the other party
- The balance carried over from the previous period
- Interest, commission, expense and tax items
- The effect of acceptance of the balance on transactions in later periods
are examined. Not every current account statement or monthly reconciliation letter used in practice is a balance statement within the meaning of the current account provisions of the Turkish Commercial Code. The legal nature of the document must be determined together with the contract between the parties and the purpose for which it was sent.
Current Account Statement and Auxiliary Account Disputes
A current account statement or an auxiliary account (muavin) listing summarizes the accounting movements relating to a particular party. These listings may show the starting point of the balance; however, a sound conclusion cannot be reached by relying only on the final balance without examining the supporting documents.
In the review:
- The opening and carried-over balance
- Invoice and document numbers
- Debit and credit entries
- Collection and payment movements
- Advance, deposit and security entries
- Returns, discounts, price differences and exchange rate differences
- Transfer and offsetting transactions
- Check, promissory note and credit card collections
- Negotiable instruments collected or returned
- Duplicate recording of the same document
- Movements posted to the wrong current account card
- Closing and carry-over to the following year
- The source of the difference between the parties’ statements
are identified. The expert examination should not turn into a report that merely states an accounting balance; the transactions in dispute must be matched one by one with the contract, delivery, payment and objection documents.
Payment, Offsetting, Set-Off, Return and Correction Entries
When there are several debt and receivable items between the parties, the debt to which a payment relates becomes important. The bank receipt (dekont) description, the receipt, the payment instruction, the current account entry and the parties’ statements must be assessed together.
The main transactions that may be in dispute:
- Bank payments with or without a description
- Cash collections and receipts
- Advance and order payments
- Payment by check or promissory note
- Set-off and offsetting agreements
- Assignment of a receivable and assumption of a debt
- Returned goods and the return invoice
- Price differences, due date surcharges and exchange rate differences
- Premiums, discounts and turnover premiums
- Security deductions and deposits
- Payment made by a third party
- Duplicate payments or payments posted to the wrong account
The presence of a payment entry in the commercial books may not by itself show that the payment was applied to the invoice in dispute. If it is unclear which debt the payment was made for, the contract, the payment description, the parties’ notices and the statutory rules on offsetting must be examined together.
Commercial Interest, Due Date Surcharge and Foreign Currency Receivables
In invoice and current account disputes, the type of interest and its start date are as important as the principal claimed. Contractual interest, commercial default interest, advance interest, due date surcharge, exchange rate difference and foreign currency receivable are not the same concepts.
In the assessment:
- The commercial nature of the transaction
- The parties’ status as merchants
- The interest and due date provisions in the contract
- Consistency of unilateral entries on the invoice with the contract
- The date of maturity and default
- The form and service of the formal notice
- Partial payment and interest calculation
- Payment and exchange rate options in a foreign currency debt
- Interest and the account period in a current account
- Statutory limits on compound interest
- Tax and expense items
are examined. Because interest rates and monetary limits may change over time, the regulations in force on the date of the lawsuit or enforcement proceedings must be checked separately.
Our Approach in a Current Account Dispute
First we determine whether the relationship rests on a written current account agreement or on an open account. Then the opening balance, invoices, payments, returns and offsetting entries are compared transaction by transaction; disputed and accepted items are separated.
The limit of the one-month objection period
TTK Art. 94/2 attaches a consequence to a failure to object within one month of receipt of the balance statement in a statutory current account. The provisions on notary, registered letter, telegram or a notice with a secure electronic signature are taken into account. This rule does not apply automatically to every accounting statement.
Delivery of a check is not the same as collection
The booking of a check or note to the account, its due date, the result of its collection and its effect on the underlying debt are tracked separately. In a statutory current account, the provision of TTK Art. 90 on the recording of commercial paper is also assessed. Care is taken that the same debt is not claimed twice, both on the invoice and on the note.
How should you prepare the account listing?
Match the document number, date, currency, debit, credit, payment description and supporting file with the same transaction. A formula or an accounting balance does not replace the final amount that can be legally claimed.