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M
M-BSE
November 1, 2022
Question

How to use a credit on account when recording check with multiple payments

  • November 1, 2022
  • 1 reply
  • 0 views

We have a corporate client that sends one check for many invoices sent to many different locations (each location a business unit). In our company file, each of these locations is a separate customer (not jobs under a parent customer). This client also adjusts each payment with an early pay discount, as they do with credits. So here's how a typical check would look:

 

Inv NumDesc. (location)Gross AmtAdjustmentNet Amt
10001Unit X145.055.80139.25
10008Unit Y357.6514.31343.34
Z-CMUnit Z-219.19-8.57-205.62

 

How do we record this Z-CM credit when there's no other Unit Z payments on the same check to use along with it?

 

BTW this is not a credit memo, but a credit on Unit Z account due to prior overpayment. Thus there's no numbered credit memo. 

1 reply

M
MirriamM
November 1, 2022

Hi there, @M-BSE. I'm here to lend a hand in recording your transaction.

 

You can create an invoice with a discount for invoices 10001 and 10008. Then, post it under Undeposited funds. And for the Z-CM, create a Journal entry and credit it to Undeposited funds. By doing this, you can make one deposit.

 

However, since every business is unique, I recommend consulting an accountant before following the steps above to ensure your books are accurate. 

 

For tips and detailed instructions on how to keep your accounts balanced and in order, see this article for future reference: Reconcile an account in QuickBooks Desktop. It contains topics about the opening balance and the reconciliation process.

 

Please leave a comment if there’s anything else you need. I’m here to provide further assistance. Have a good one!

M
M-BSEAuthor
November 10, 2022

Thanks. You said "And for the Z-CM, create a Journal entry and credit it to Undeposited funds. By doing this, you can make one deposit." Can you illustrate the construction of that journal entry, and confirm that entering this journal entry will result in something that can be deposited? I don't see how to enter an account on the JE that will reduce the customer's credits. 

 

JessT
JessT
November 11, 2022

Hi M-BSE,

 

I'd like to clarify some processes, and I highly suggest consulting an accounting professional to review the entries and the movement of funds between accounts.

 

When Z-CM overpaid its invoice, the overpayment also hits the Accounts Receivable. Therefore, we'll need to transfer that amount to a clearing account, so it can be transferred as a credit to one of the customers (A/R), preferably Unit Y. We'll use that credit to partially pay its balance, $343.34.

 

As for the received check payment, you can record it as a deposit to cash/check in hand or to your bank account if it's already endorsed. Then, use the clearing account as a category so that the amount can be transferred into credits for Unit X and Unit Y. The credits will then be applied as payments to their invoices.

 

Please back up your company file before we start entering multiple transactions.

 

Step 1: Create a clearing account.

 

  1. From the Lists menu, select Chart of Accounts.
  2. Right-click anywhere in the Chart of Accounts, then select New.
  3. In the Add New Account window, select the Bank radio button, and click Continue.
  4. In the Account Name field, enter Clearing Account, Barter Account, or Wash Account.
  5. Select Save & Close.

 

Step 2: Move the overpayment of 205.62 from customer Z-CM to the clearing account via journal entry.

 

 

Step 3: Move 205.62 from the clearing account to Accounts Receivable for Unit Y. This offsets the balance of the clearing account as well.

 

 

Step 4: Now that Unit Y has a credit of 205.62, you can use it to partially pay invoice #10008.

 

Step 5: After the payment, record a deposit for the received check payment, as shown below.

 

 

Step 6: After the deposit, transfer amounts from the clearing account to customers Unit X and Unit Y, like in Step 3. One journal entry for each transfer/customer. This should offset the balance of the clearing account.

 

Step 7: Pay Unit X and Unit Y's invoices using the transferred credits.

 

There you have it. Let me know if you have other concerns with your customer's payment. Take care and have a good one!

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