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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