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Apples521
March 8, 2025
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Entry for deleting payment received in prior year

  • March 8, 2025
  • 1 reply
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Hi, I have an invoice that was created in 2023 and payments were received against that invoice in 2023 and 2024.  There are 3 payments recived in 2023 that are incorrect and need to be deleted, whcih can't be done since 2023 is locked down.  The bank reconciled due to an adjusting entry made 12/31/2023 to address years worth of discrepencies, but now the balance due on this invoice is understated by the 3 payments incorrectly received in 2023.

What entry do I need to make to essentially delete these payments?  Do I debit AR and credit RE?

Best answer by Rainflurry

@Apples521 

 

Then, posting to RE, as you originally suggested, is probably the proper entry in this case (debit A/R, credit RE for the 3 payments). Alternatively, you can create an invoice for the customer with a service item mapped to RE. That does the exact same thing as a JE that debits A/R and credits RE. JEs don't show on all reports and bypass cash vs. accrual reporting.

1 reply

Rainflurry
Rainflurry
March 9, 2025

@Apples521 

 

What was the exact journal entry (JE) made on 12-31-23?  A debit to ??? and a credit to the bank account?

 

I wouldn't suggest posting this to RE.  That would increase a prior year's net income without ever reporting it as income - your tax preparer will wonder how RE increased.  The answer for the proper entry, IMO, is a debit to A/R and a credit to the debit entry on the 12-31-23 JE, depending on what that is.  If you can provide the 12-31-23 JE, that would be helpful.      

 

 

    A
    Apples521Author
    March 11, 2025

    I'm not sure on the exact entry as there isn't a specific entry addressing these specific payments.  I'm seeing a dozen or so YE adjustments for 2023.  Most are for payroll, owners draws, reclassifying undeposited funds to sales or addressing specific BS items which wouldn't apply here.  

     

    The one entry I see "to clear out prior year deposits originally recorded to a liabilty acct" 

    Dr Retained Earnings

        Cr Checking

     

    From the dozen entries I see, this is really the only one that looks like it could have been one to balance those wrong payments.

    Rainflurry
    RainflurryAnswer
    March 12, 2025

    @Apples521 

     

    Then, posting to RE, as you originally suggested, is probably the proper entry in this case (debit A/R, credit RE for the 3 payments). Alternatively, you can create an invoice for the customer with a service item mapped to RE. That does the exact same thing as a JE that debits A/R and credits RE. JEs don't show on all reports and bypass cash vs. accrual reporting.

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