Question

How do I post a payment for an order that was a write-off to bad debt?

Answer

Once an order has been written-off it, that write-off amount can not be removed or voided as that transaction was considered non-collectible.

To recognize the payment from that customer you should do the following:

  1. Post an overpayment to the customer's account. This will create a credit balance on the company record.
  2. Reduce the credit balance by the amount of the overpayment you just posted.

Once those two items are posted the (credit entry) to Credits Given will net against the (debit entry) Write-Off that was posted in a prior time period resulting in a $0.00 impact to sales.

For instance, let's say there was a $50.00 write-off that is now being paid by the customer, the net result on your financials would be:

-- Recognizing the initial write-off on the order.
Debit - Write Offs $50.00
   Credit - Accounts Receivable - $50.00
 
-- Recognizing the overpayment to the customer's account.
Debit - Undeposited Funds $50.00
   Credit - Customer Credit $50.00
 
-- Removing the credit balance that was created from the overpayment.
Debit - Customer Credit $50.00
   Credit - Credits Given $50.00

This results in a net impact of $0.00 change to your sales/income totals while still recognizing the $50.00 you received in payment. The only difference is that the payment is seen as an overpayment instead of a payment to that specific order. From an accounting standpoint where total sales / expenses are concerned the result is the same in the end.

Version Information

  • Entered : 02/2015
  • Version(s) : SMS and Control

See Also