Posting vendor payment to clear payables and receivables

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I have a vendor which we've started to do a lot of warranty service for & they've applied as credits to our account with them. Since warranty work was becoming very regular, I began to bill these jobs to separate from our purchases & requested they pay by our invoices. The vendor sent payment to clear both payables (-4000.00) & receivables (-2000.00) which also includes early payment discounts not included when clearing our account with them previously (I have already made an entry in payables to reflect the discounts). I'm still not sure that I entered the first payment correctly, but it appears ok. But now I have to clear all & I'm not sure how. I have gone as far as to create a contra account, which I applied the payables to but it didn't seem right to me, so I stopped there. I would be most grateful to anyone that can help direct me on this entry.

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  • 0
    verified answer

    You can do the same as mentioned above. First do the contras between both the vendor and the customer, then all you will have left is the receivable that the customer owes you. Acct Payable will have been cleared out to nil so no balance owing.  

    Now at this point you may want to create a sales invoice to credit for the Early Pmt Discount that is now taken on previously paid invoices - this amount will not include taxes as it is not applicable and should be coded to a revenue account called something like Early Pmt Discount.

    Then go ahead in the Receipt journal and choose each unpaid invoice as paid but also enter the amount for early payment discount in the 'discount taken' column. You will also be including the 'Contra' amount from A/P but there will be no discount on this one since it has nothing to do with sales invoices nor will there be any discount for the warranty invoices or the 'Discount' credit invoice you just made up. In the end you should be able to reach the same total as the cheque paid to you.

    You may want to print off an aged detail listing showing the paid invoices as well and go thru each invoice marking the discount to verify same discount taken by customer.

  • 0 in reply to Smith and Co

    I just realized I posted an answer instead of replying. Clearly I am very new here...lol

    Thank you soooo very much! :)

  • 0 in reply to carly

    Hi Smithco,

    Very sorry to bother you with this again, but something seems to have gone wrong. Here is what I did (mind you, this is my first time doing this type of entry).

    Using test account I created a contra bank account. I then reversed the warranty credits in payables & billed each invoice in receivables under correct accounts for labour etc. AMT: $7671.50.

    I then created an invoice in receivables to include the early payment discounts using our usual account named "discounts earned" AMT: $80.17. I offset the payables amount against an invoice in receivables (of course with same amount) using the contra account on both. AMT: $844.28. I then I applied the payment received to the balance owing in receivables. AMT: $6907.39.

    Contra account shows a zero balance. Both A/P & A/R accounts cleared & appears correct in my records to the best of my knowledge. However, I use a separate receivables spreadsheet to balance payables & receivables and it shows that I am out by $764.11.

    I also tried it another way which you had suggested to someone else, which was to create a credit invoice on each A/P & A/R using the contra account. Used ContraA/P & ContraA/R as invoice numbers, then cleared the invoices against the credits. But still the same outcome on my spreadsheet. Did I miss a step or do it wrong?

  • 0 in reply to carly

    It looks like you did not enter the discount invoice of 80.17 on your receivable spreadsheet.

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