Here is a circular flow of income that I took from Krugman's macroenomics textbook. Please notice, in this diagram households just give their savings to banks (which are part of the financial sector) and everybody else seem to just take these money, not returning them. For an example, Government transfers to households are just good old welfare, not payment for money that the government borrowed from households. Besides, the financial market gives access not only to savings of national households, but also to savings of foreign households. So there should be a separate outward flow from the Government and Firms specifically to the finanical market and specifically for paying their debts. As for the Foreign sector, it needs to add "payment for debts" to its out outward flow to the financial market. But even without the Foreign sector normally debts are paid to banks, rather than directly to people who keep their money in banks.
Do I read the diagram wrong? If yes, how do then Government, Firms and the Foreign sector return money that they borrowed from households according to this diagram? If no, then why does this scheme NOT include any flows for returning borrowed money? I understand that it's all simplification of real life, but presenting borrowing in way that is indistinguishable from charity seems like an OVERsimplification, I don't see reasons why to present borrowing like this. Please enlighten me if you understand why borrowing was presented like this, like a charity.