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Voiding invoices / Entries for unpaid invoices

Forum|Forum|7 years ago
December 11, 2018
5 replies
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We have some 2016 invoices that are still unpaid and we would like to void it (we can't contact the customer anymore) but we already closed our 2016 books. Should we leave it open and just make some adjusting entries? If so, what should be the entry?

Please advise. Thanks!

QuickBooks Enterprise Suite

Best answer by PreciousB

Hi there Ai,

Voiding an invoice in a closed period will affect financial statements. We recommend you do not void an invoice that was created in a closed period.

These steps will allow you to leave financials as they were in the previous year, while closing the invoice and reducing income in the current year.

Create a backup of your company file.
Make a note of the customer name, items and amounts on the invoice from the closed period.
Create a credit memo.
Select the same customer, items and amounts in this credit memo as the ones noted in step two - ensuring that the date of the credit memo is in the current period.
Click Save & Close.
The Available Credit window will be displayed.
Select Apply to an invoice and click OK.
Select the invoice from the closed period.
Click Done.
Review financial statements, as necessary.

Let me know if there's anything else I can do for you. Have a great day!

PreciousBAnswer

Hi there Ai,

Voiding an invoice in a closed period will affect financial statements. We recommend you do not void an invoice that was created in a closed period.

These steps will allow you to leave financials as they were in the previous year, while closing the invoice and reducing income in the current year.

Create a backup of your company file.
Make a note of the customer name, items and amounts on the invoice from the closed period.
Create a credit memo.
Select the same customer, items and amounts in this credit memo as the ones noted in step two - ensuring that the date of the credit memo is in the current period.
Click Save & Close.
The Available Credit window will be displayed.
Select Apply to an invoice and click OK.
Select the invoice from the closed period.
Click Done.
Review financial statements, as necessary.

Let me know if there's anything else I can do for you. Have a great day!

A

arkvalleyinfoAuthor

Thank you so much!

qbteachmt

"a JE that does not affect a bank account should not affect a cash basis report"

And that is one of the issues; they show All the time, for financial reporting. On the other hand, this is not seen in Customer or Vendor reporting, because it is not a Customer or Vendor name transaction. In QB, this is Source and Target Names.

Everything I describe, you can test. Also, many older Help topics warn you about JE.

"It is unlikely that Inventory is an issue with a Bad Debt write-off."

That might be true, but is there is Sales Taxes, then the JE will not Reverse the open sale and offset any sales tax condition as a result of the initial sale. Intuit calls it "Bad Debt" but really, it is Write Off uncollected AR, which is the reversal of a Sale. Your Item on the credit memo can link to Bad Debt as expense, but look at your tax form. The IRS calls it Allowances and Refunds as Contra-Accounting, which makes it (negative) Income; I use the name Refund/Write Off.

qbteachmt

Customer Transactions for Sales as AR will be honored on Cash Vs Accrual basis reporting. JE are never honored and always reported on both basis. JE do not allow you to use Items, and this is especially a problem if you need to manage inventory. Sales tax is only one of many issues you need to worry about. Even if it is Nontaxable, a JE will not report on the sales tax reports at all. It is not a Sale. Try the reporting yourself, to understand that mess that is being made here. Also, JE to AR doesn't have Terms or properly Age. Yes, it makes a Significant difference using Credit memo vs JE. Try issuing a JE and a refund, then use Credit memo and do it properly.

Let me give you another example:
In the Receive Payment screen, you can use the Discount function, which results in Out of Balance reporting. You should use Credit Memo to clear open AR balances.

You can see Out Of Balance reporting in my attachment.

M

Malcolm Ziman

"JE are never honored and always reported on both basis"
I did a test and established that a JE shows on a cash basis P&L even if a bank account is not used (which I don't think is the right way - a JE that does not affect a bank account should not affect a cash basis report). . Thank you to Teach for highlighting that. So if the poster is on the cash basis, he/she should not use a JE for a bad debt as the Bad Debt will show as an expense, and it is not an expense on the cash basis. On the accrual basis, a JE works. But as Teach says if you are using the QB Sales tax tool, it won't work. It is unlikely that Inventory is an issue with a Bad Debt write-off.

qbteachmt

"You might have to go into the customer to apply the credit, but it should be automatic"

There is no Automatic application of a JE for AR. The AR transactions will remind you there is a credit available for open charges, because both Invoice and Credit Memo have Icons on the Ribbon = Tools.

By using JE, you made a brute force accounting entry that is not linked to anything else. You will have to link it by using Receive Payment for that name and leaving the amount as 0. But it is better to avoid JE for AR, sales, sales taxes, and customer activities.

M

Malcolm Ziman

"Select the same customer, items and amounts in this credit memo as the ones noted in step two - ensuring that the date of the credit memo is in the current period." This will reduce sales for the current period, which is not really right. It would be more meaningful to debit a Bad Debts expense. It does not affect the net profit, but it does affect margin%.

A

arkvalleyinfoAuthor

If I debit a Bad Debts expense, the invoice is still open. I wanna know if there's any way that it wont show up anymore on our A/R.

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