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C
CB in CT
March 24, 2020
Solved

Negative Accounts Receivable

  • March 24, 2020
  • 3 replies
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The resultant credit from an overpayment shows the credit balance in the customer’s account - ok. However, on the balance sheet , it shows up as a negative accounts receivable. It should show up as a positive accounts payable. How can I fix this?  Thank you!

Best answer by BigRedConsulting

No, it won't do that, and I don't think it should.

 

It is better to show AR with a contra-balance than to recast it as AP, which it is not.

 

Similarly, if you have a bank account with a negative balance, it is still cash/still an asset, but with a contra-balance.

3 replies

BigRedConsulting
BigRedConsultingAnswer
March 24, 2020

No, it won't do that, and I don't think it should.

 

It is better to show AR with a contra-balance than to recast it as AP, which it is not.

 

Similarly, if you have a bank account with a negative balance, it is still cash/still an asset, but with a contra-balance.

C
CB in CTAuthor
March 24, 2020

Thank you!  Didn’t understand that before.  I’ll leave it as is. 

Stay well. 

john-pero
john-pero
March 24, 2020

Negative A/R is the correct posting of an unapplied customer credit. A/P is vendor balances - what you owe not a customer. You will want to move the negative A.R to an other current liability account other than A/P. Whatever you do you will have to reverse your actions once you have an actual sale to this customer.

 

If you toggle to cash basis on your B/S report the negative A/R should drop down to Retained Earnings and clear the negative A/R

    C
    CB in CTAuthor
    March 24, 2020

    Thank you, John. Learning something new everyday. 

    Stay well. 

    J
    Jhay
    March 30, 2020

    We owe a negative accounts receivable from and over payment to the client. How do we record the payable and get rid of the negative account receivable?

    K
    Kendra H
    March 30, 2020

    Good evening, @ Jhay. 

     

    Thanks for joining this thread. 

     

    Before going into detail, It's always best to check with your accountant to be sure this option would work for your business setup.

     

    Below, are several articles, including information about Account Receivable accounts with how they work and more: 

    Let me know if the information above does the trick. If you have any more questions, please don't hesitate to reach back out. Have a good one!

     

     

    J
    Jhay
    March 31, 2020

    I couldn't find the answer in your links above, but maybe I need to clarify. We received two payments from a client for the same invoice. One payment was applied to the invoice. The other payment was credited to the account and shows a negative A/R. We owe that second payment to the client since they already paid the intended invoice. How do I get rid of the negative A/R and record the payable to the client?

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