Accounts Receivable
Overpayment & Underpayment

Hi Jennifer, I would like to know how to handle "old" transactions for accounts receivable overpayments and underpayments from customers in 2009. One is a .01 underpayment and the other .45 overpayment. I've spent hours trying different methods to get rid of these, but nothing works! Even tried a JE, which I'm sure I didn't input correctly. Help - - please! If this solution is in one of your books, please advise which one, and I will be happy to buy it.

Thanks so much. Kathy

Reply:

Hi Kathy!

I'm going to discuss your answer in the context of the "accounting theory" of Accounts Receivable. This will help you understand what is happening behind the scenes. In the future, you will understand what to do and will be able to teach others.

Accounts receivable overpayments

An A/R overpayment results in the customer having something called a "credit" balance on your books. In regards to A/R, a "credit" simply means that you received payment. Credits to A/R always lower a customer's A/R balance with you.

Normally, your A/R customers have "debit" balances. This means they owe YOU money. So, when you have an overpayment, there is a "credit balance." This means that you owe THEM money. It also means that in order to remove the "credit balance" from the books, you have to do so with a "debit".

Although there are a couple ways to do this, I find the easiest way is to go to the General Journal. Enter the appropriate date. In the Account column, choose Accounts Receivable. In the debit column, enter the overpayment. Tab over to the Name column. Enter the customer's name. Tab down to the next line. You will see that QB has already entered the offsetting amount as a credit. In the Account column, enter the account you want to write this off to. Since it's so small I would choose Miscellaneous. If you are unsure, consult your CPA. Save the transaction.

In order for these to stop showing on accounts receivable aging reports, apply the journal entry to the overpayment. Do so by going to the Receive payments window. Choose your customer. Do not enter any other information, but notice that the journal entries appear somewhere here... not sure where it will appear on YOUR screen because there might be other activity for this customer. If there is no other activity then the journal entry will appear as the first entry in the box.

Once you've located the journal entry, highlight it then click Discounts & Credits. Here you will see the overpayment. QB might choose it for you, if not choose it yourself. Click Done.

QB adds a column called, "Credits," to this window. The entries offset each other and you can click Save.

Accounts receivable underpayments

The theory is exactly the opposite. The underpayment results in the customer still having a "debit balance" with you... in other words, they STILL owe the money. But since it's so small you don't want to send an invoice. So you will remove this from the books by entering a credit to their A/R account.

In order to write this off, go back to the General Journal (I use the term "write off" loosely here. This entry will be an ADDITION to your P&L). Enter the appropriate date. In the Account column, choose Accounts Receivable. In the credit column, enter the underpayment. Tab over to the Name column. Enter the customer's name. Tab down to the next line. You will see that QB has already entered the offsetting amount as a debit. In the Account column, enter the account you want to write this off to. Since it's so small I would choose Miscellaneous. If you are unsure, consult your CPA. Save the transaction.

To remove these from the accounts receivable aging reports, follow the steps I outlined above.

I hope this answers your question. If you could post a comment below I would appreciate it!

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Overpayment & Underpayment
















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Comments for Accounts Receivable
Overpayment & Underpayment

Click here to add your own comments

May 14, 2014
Much easier! NEW
by: Stephanie

Thank you! This is SOOOOOO much easier than the way I was doing it. :)

Mar 12, 2014
Received ck back from an overpayment NEW
by: Amber

I overpaid an Invoice and vendor returned the difference. I now have a deposit to record. There is no Invoice where/how do I apply the chek?

Thank you.

Mar 12, 2014
Received ck back from an overpayment NEW
by: Amber

I overpaid an Invoice and vendor returned the difference. I now have a deposit to record. There is no Invoice where/how do I apply the chek?

Thank you.

May 07, 2013
Thanks NEW
by: Anonymous

Thanks

Nov 26, 2012
Thanks NEW
by: Prashant Shah

Thanks for this clarification... This is helpful...

Sep 19, 2012
Over and shortpay journal entry NEW
by: Anonymous

Why customer overpay and shortpay for the invoice?

Apr 16, 2011
Misclll Income or Expense?
by: Anonymous

Hello Kathy, you're the best.
My question us this: I saw a journal entry coming through for this type of problem. But when we have to offset an "underpayment" (need to credit A/R) and debit Income statement...should we debit a "miscellaneous" Revenue account or Expense account?

Mar 18, 2010
Thanks
by: Tonya

I wanted to thank you for having this site, I had a problem kind of like Kathy's with a credit on our books that I couldn't get off, been trying to figure it out for months then came across your site, followed your instructions and it is done now and off the books. I am new to QB so any time I can't figure something out I google it and found your site I will continue to looke for answers from you. Even the QB forum didn't help. Thanks again. Tonya

Mar 10, 2010
Linking transactions
by: Anonymous

I use an old (8.1) version of QB and after journaling off an over payment I then need to go back to the original payment and allocate the overpaid portion to the journal entry.

This ensures that the transaction is removed completely from your open invoices report. If you don't do this, you end up with 2 equal offsetting transactions in this report.

Hope this helps.

Feb 24, 2010
Accounts Receivable
by: Anonymous

I have this problem also. I followed your instructions to get the credit off of our clients account. I went back to the receive payments, clicked on the right amount and it doubled my credit. I am so confused.

Reply: If it doubled, then you did a step backwards. Go back and do the opposite of whatever you did... debit what you credited, and credit what you debited. See if that doesn't do the trick.

Feb 17, 2010
Underpayment / Overpayment
by: Kathy

Hi Jennifer! THANK YOU SO MUCH!
It is such a relief to finally get a COMPLETE answer!

Your detailed instructions guided me thru perfectly, and I am thrilled to finally get this off my books.

What I like is that you don't assume that everyone has a thorough understanding of what goes on behind a transaction, and even though it may be common sense for someone with an accounting background, it's a new "language" for us beginners and we appreciate the step-by-step instructions. AWESOME!

Thank you again, Jennifer. You are truly wonderful and have made me one happy gal!
Kathy

[Reply:]

You are welcome Kathy! I appreciate the feedback.

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