We have a customer who we had filed a cumulative $315.00 lien against. The customer paid us $235 (which satisfied one part of this lien) and we filed a satisfaction of the total lien in error. Now we have to "eat" the $80. Appreciate best method of documenting this error. TIA
It is cash basis, no sales tax, followed the example in "help" and added a "bad debt" account as an expense, transfered the $80 to that account, the main customer account now lists the corrected amount. While looking at the list of accounts/bad debt, it shows no amount...I am thinking it should show the $80.?? If I double click the bad debt account, the transactions shows.
Since this is a cash basis company you never claimed the income in the first place. Basically "you can't wrote off what you did not write on." Bad debt does not apply in this case. The total revenue/income that you can claim for this customer is the $235 he paid.
Here's one way to do this: Go into Receive payments and record the $235 payment. Click on discounts and enter the $80 you do not get paid. Select your normal income account or use a Sales Discount account if you wish. In either case record the $80 as income.. Your payment will be for $235 and the entire invoice of $315 will be cleared.
When you run your reports in a cash basis you will see the $315 as income plus a credit to income of $80 giving you a net of $235 income you received.
You *could* use the bad debt expense account but you will end up over stating the revenue by $80. The net income will be the correct ($315 income - $80 expense = $235 Net Income) but it gives management incorrect information of their true revenue earned.
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