Clearing stale vendor credits

Hi Franki44,

That's a great question. Clearing out these kinds of transactions is a good way to make sure your books are up-to-date and properly balanced. I recommend checking in with an accountant to see what the best way is to handle this scenario, but I'll let you know what options are available in QuickBooks Desktop for handling that kind of transaction.

On the transaction window of the vendor credit, you've probably noticed the Delete button in the toolbar. This is one way that you can delete the credit. Another option is clicking the drop-down arrow under the Delete button, which again gives you the option to Delete and also the option to Void. Choose whichever is most appropriate for your case. Deleting it would remove it from QuickBooks entirely. Voiding it keeps the transaction in your books while voiding it declares it as no longer legitimate.

If the vendor has given the company the money for the balance of the unused credits, that can be recorded as a cheque using the Write Cheques feature found on the home screen or under the Banking menu. If they haven't, consider the options in the Write off customer and supplier balances article.

In case you come across an instance in which a vendor credit was incorrectly applied, follow the step to remove or unapply a credit from an invoice or bill. You can also use our Find a ProAdvisor tool if you're in need of an accountant. Using your postal code to search your area, you can find one who knows QuickBooks Desktop.

I hope that helps. Enjoy the rest of your day. :)

I don't recommend deleting any vendor credits, especially if they have been on the books for a long time or if they span a wide time frame.  By deleting them, you are affecting multiple previous periods and could be causing a world of hurt for yourself by knocking your Trial Balance out of whack.  Keep in mind that deleting the vendor credit not only deletes the transaction from the A/P ledger, but also deletes the GL expense account that was used as well as the any tax amounts.

There are a couple of ways to clear vendor credits that you believe should no longer be there, although, I wonder what renders them invalid?  If they were a valid credit at one time, why were the credits never used against subsequent bills or reimbursed by the vendor?  That's a whole other question that should be investigated. 

1)  Create a bill that is exactly the opposite of the credit, using the same expense accounts and tax codes, but dated in the current period.  Use the 'Pay Bills' window to 'pay' the invoices with the existing credits.

2)  Create a General JE with Accounts Payable in the first line, CR the total amount, tab over to 'Name' and enter the name of the vendor.  On 2nd and subsequent lines, enter the expense account(s), DR amount,  and tax line.  When entering taxes in a GJE, use the tax payable liability account, then tab over to 'tax item' field and enter the item code used for your GST/HST ITC's, so that the tax is coded properly to show up on the tax reports.   As in #1, use the 'Pay Bills' window to 'pay' the amount you just created with the existing credits.

The easier of the two is definitely #1, but for whatever reason, some people may have their own reasons for adjusting with a GJE instead.  Either way gets you the same result.

1 question about that solution. Won't entering a bill to offset the credit create an expense on your financial reports that you didn't actually incur? 

By not taking the credit you did incur an expense.

Hello @RyanMoore540 ,

The previous poster is correct.  The reason for the adjustment is that the existing vendor credit is "invalid", as described by the OP, meaning that the existing credit was never actually incurred, or incurred incorrectly.  Since there is already an expense credit on the books which is "invalid", both methods I suggested are simply reversing the "invalid" transaction, netting both the expense and the vendor liability to $0.00.

Ok that makes much more sense. Thank you! 

I am wondering if this method would work for credits from several years ago, after the books have been closed? I just took over for a bookkeeper that did not apply credits properly and am trying to clean the books by year end, so that we can start fresh for next year. I do not want to add any expenses for this year. It makes sense  to me that they would zero each other out, however I am worried since there is a cross over in years and the past years books have been closed by the accountant. I have talked to him about it and he said I could make entries to clear them, as long as it does not affect this years books.

I am also trying to clear old tax liabilities that had not been properly applied. I did what I found online as a "fix" for that but the first one I tried generated an error so I did not want to repeat it. 

Thank you for your help.

Hi there ljbswssd1,

Thanks for joining in on this thread. I like your plan to clean up the books in order to have a fresh start in the new year. That's a fantastic approach to take, especially since you're taking over the bookkeeping from somebody else. QuickBooks Desktop is a robust accounting software and it's important that the correct steps are followed to to clear up issues. Let me explain what I mean.

Once the books have been closed, you're be restricted in terms of what data you can access and edit. In order to modify or delete credits from previous years, you must know the closing date password that was set by the previous bookkeeper. QuickBooks Desktop will allow you to enter transactions that'll affect the balance of closed fiscal years, but it isn't advised. 

Because of this, it's best to continue working with the previous bookkeeper for your company, or with another accounting professional to determine the best steps to take. If you'd like to get in touch with a QuickBooks ProAdvisor in your area who can point you in the right direction, simply enter your city or postal code in the field found at this link: Find a ProAdvisor.

I've compiled a few relevant articles that I think will be useful for you to review in this situation:

• Close your books in QuickBooks Desktop
• Use journal entries to adjust your client's books

I encourage other members of the Community to chime in here. We have some ProAdvisors that regularly engage in these threads that may have some additional advice to provide. Best of luck!

Thank you for responding. 

Unfortunately I do not have contact with the old bookkeeper, the position was empty when I arrived as the previous bookkeeper had been let go prior to my arrival. That in itself has been a challenge.

I have been working with the accountant virtually on this, and will continue to do so. He has given me the code to make changes, however I do not want to make any changes that would affect previous years books. 

Thank you for the link I will look at it. 

I appreciate your input and any others that want to jump in.

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@Franki44 wrote:

I've jumped into a QBD that has old vendor credits that are no longer legitimate. What is the best process for clearing these.

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I'm new at my job too and there is an old credit showing on a vendor.  How do I even go about finding where it originated?

Hi BeccaL1,

Thanks for joining in on this thread. I'm excited to see that you're just getting started with QuickBooks Desktop, and the Community forum is an awesome resource for finding help to your questions. I'll point you in the right direction for working with these old vendor credits in the books you've taken on.

I recommend starting by reading through this thread, where a number of ideas and solutions that you can consider have been shared. When you're not sure which is the right solution for your books, it's best to work with an accountant to make sure that the books remain balanced and correct. As I mentioned in my original response on this thread, our Find an Accountant page can help you connect with a QuickBooks-certified accountant if you don't already have someone you're working with.

As for where the vendor credits came from, they're not necessarily linked directly to any specific vendor transaction. A vendor credit can quite simply be created using the Credits portion of the Enter Bills feature at any time. If you'd like to see when it was entered in the sequence of data entry, you can make use of a report called the Audit Trail. This shows you all data entry and changes to the books for whatever period you run the report for. Here's how to find it.

1. Select Reports from the top menu, then Report Centre.
2. Use the Report Centre search bar to type and enter Audit Trail.
3. Select the report to run it and see the data.

This article can help with customizing your report afterward: Customize reports in QuickBooks Desktop

I hope that helps you get on track. Don't hesitate to visit the QuickBooks Community again or reply here if you have further questions. :)

Hi @BeccaL1 ,

The procedure I outlined above will take care of old vendor credits.  You will need to track down what account was used in the original transaction, or pick an account that can absorb the adjusting entry without causing problems.  Make all adjusting entries in the current financial period, or the one you are working on closing out.  Make sure to use the same vendor name that was used in the original credit.  Then go to Pay Bills and apply the credits to the adjusting entries you've just made.