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A case may occur when a customer wants to apply credit balance to an affiliated company’s open invoice.
Customer (Mark) has a $500 credit balance. Customer (Martha) has a $500 Open Invoice. They like to clear the accounts by applying $500 credit from Mark’s account to $500 Open Invoice of Martha’s account.
One easy way to handle transfer credit from one customer to another customer is to write a Journal Entry in QBO.
Click on the screenshots below to enlarge them
To create a Journal Entry
From the home page screen, click Create+ sign
Click Journal Entry tab under Other heading.
Enter the date.
On the first line, from the Account drop down list, select Accounts Receivable (A/R).
In the Debit field, enter the unapplied amount being transferred. Example:$500.
In the Memo field, note the reason for the Journal Entry. Example: credit transfer to Martha’s account.
From the Name drop down list, select the customer name that credit is being transferred from. Example: Mark
On the second line, from the Account drop down list, select Accounts Receivable (A/R) again.
In the Credit field, enter the credit amount (same as debit amount). Example:$500
In the Memo field, note the reason for the Journal Entry. Example: credit transfer from Mark’s account.
From the Name drop down list, select the name of the customer that the credit is being transferred to. Example: Martha
The final step is to Receive Payment on both customer accounts so that it will show “Paid and Closed” customer status
From the home page screen, click Create+ sign
Go to the Customers tab and click Receive Payment.
Select the customer (example: Mark).
Make sure that the credit and Journal Entry are checked at the left (make no other entry on the Receive Payment form.)
Make sure “Amount received” show zero amount.
Follow the same “Receive Payment” steps as above for the customer (Martha).
Receive Payment (Customer Mark)
Receive Payment (Customer Martha)
Customer Mark’s Page with Paid and Closed Status
Customer Martha’s Page with Paid and Closed Status
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As a general rule, you will use the Equity accounts for one other side entry.
What you have are a possible two options.
If you are transferring, opening balance from all the Balance Sheet accounts (assets and liabilities), use Opening Balance Equity (under Equity type) account. Opening Balance Equity Account will Net out to zero once all the Balance Sheet accounts are transferred.
If on the other hand, certain opening balance accounts (like bank account) are already transferred, then you will need to review further how and where they were transferred. If you see zero balance on Opening Balance Equity Account, might as well directly transfer to Owner’s Draw or Owner’s Equity Account.
For AR opening balance, you will to reenter customer invoices again. Depending upon your accounting method (cash or accrual basis). In general, you will enter Invoice to Income Account on Cash basis; and on Accrual basis, you will enter other side of entry to Equity Account. Make sure to consult with your CPA Accountant or Tax Accountant. Exactly the same procedure also applies to AP opening balance. Journal Entry will not work.
For Inventory Asset opening balance, you will need to use Product/Services feature to enter inventory value and quantity. Journal Entry will not work.
For other Balance Sheet Accounts, couple of options available are to enter, but writing Journal Entry will also work fine.
For Opening Balance date, I prefer to use ending balance date. For example for 1/1/2014, I like to use Ending Balance date of 12/31/2013. Balance amount is still the same.
Same steps are applicable to Income and Expense accounts, especially you are transferring anytime during the year.
A journal entry is to record a transaction in Journal type.
Journal entry is entered with knowledge of debits and credits assigned to specific accounts using a Chart of Accounts. The total of the debits must equal the total of the credits or the journal entry is said to be “unbalanced.”
QuickBooks is a form-based accounting program. It has specifically designed forms to enter each type of transaction. In QuickBooks, incorrect using of journal entry will mess up all kinds of reports. It is better to avoid write a journal entry unless for recording certain specific transactions which cannot be recorded by other designated forms in QuickBooks.
Perfect example to write a journal entry would be for recording depreciation expense or write off certain prepaid expense in QuickBooks. Certain year-end adjustments by auditors are commonly recorded by way of journal entries in QuickBooks.
Example, how to write a journal entry for depreciation expense of $1,000.
Drepciation expense —> Debit —> $1,000
Accumulation Depreciation —> Credit —-> $1,000
Where is Journal Entry form in new QuickBooks Online?