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Community Manager

Clearing out old transactions from Accounts Payable?

We need to clear down the A/R and A/P as there are some very old transactions dating back many years.   We wanted to do one journal entry for everything, but I believe QBO only allows payment to specific customers/suppliers – is there any way around this?  

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Best answer 03-29-2018

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Community Manager

Re: Clearing out old transactions from Accounts Payable?

Clearing old Accounts Receivable (A/R) and Account Payable (A/P) balances can be a little tricky.   We can give you the information you need to get these balances taken care of, however, it would still be best to consult with your accountant to make sure what's best for you and your business.

 

The most efficient way to clear any payables is to pay it off.   Aside from making journal entries, this includes creating a clearing account.  The steps are similar to setting up a bank account in your chart of accounts, but without an opening balance.

 

Once you're ready, you can follow the steps below to clear off those A/P balances:

Create the appropriate journal entry:

1) Click the Plus sign (+), then choose Journal Entry.

2) In the Journal Entry window, change the date if necessary.

3) In the Account Field, choose Creditors from the drop-down list.

4) Enter the amount in the Debit field.

5)Tab to the name field and select the Supplier from the drop-down list.

6) In the next row, choose the off-setting or the clearing account in the Account field.

7) The amount in the Credit field should be equal to the amount in the Debit field.

8) Click Save & Close.

 

Apply the general journal entry to the existing balance:

1) Go to Expenses, and then choose Suppliers at the top.

2) Click on the supplier name, and look for the Bill to pay it.

3) Click the Make Payment button in the top-right corner. When the Bill Payment window opens, the Journal Entrywill be under the Credits section.

4) Select the Bill and the Journal Entry to link them.

5) Click Save & Close.

21 REPLIES 21
Community Manager

Re: Clearing out old transactions from Accounts Payable?

Clearing old Accounts Receivable (A/R) and Account Payable (A/P) balances can be a little tricky.   We can give you the information you need to get these balances taken care of, however, it would still be best to consult with your accountant to make sure what's best for you and your business.

 

The most efficient way to clear any payables is to pay it off.   Aside from making journal entries, this includes creating a clearing account.  The steps are similar to setting up a bank account in your chart of accounts, but without an opening balance.

 

Once you're ready, you can follow the steps below to clear off those A/P balances:

Create the appropriate journal entry:

1) Click the Plus sign (+), then choose Journal Entry.

2) In the Journal Entry window, change the date if necessary.

3) In the Account Field, choose Creditors from the drop-down list.

4) Enter the amount in the Debit field.

5)Tab to the name field and select the Supplier from the drop-down list.

6) In the next row, choose the off-setting or the clearing account in the Account field.

7) The amount in the Credit field should be equal to the amount in the Debit field.

8) Click Save & Close.

 

Apply the general journal entry to the existing balance:

1) Go to Expenses, and then choose Suppliers at the top.

2) Click on the supplier name, and look for the Bill to pay it.

3) Click the Make Payment button in the top-right corner. When the Bill Payment window opens, the Journal Entrywill be under the Credits section.

4) Select the Bill and the Journal Entry to link them.

5) Click Save & Close.

Established Member

Re: Clearing out old transactions from Accounts Payable?

How can I do it Desktop?

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Good day, Bluewaterbookkeeping66.

 

Let me walk you through in the Desktop version.

 

First, we'll have to create a clearing account. Here's how:

  1. Click Lists, then go to Chart of Accounts.
  2. Click Account, then choose New.
  3. Choose Bank, then click Continue.
  4. Enter a desired name (example: clearing account).
  5. Click Save & Close.

Next, create a journal entry. Here's how:

  1. Click Accountant, then go to Make General Journal Entries.
  2. In the Account field, choose Creditors.
  3. Enter the amount in the Debit field, then choose the supplier in the Name field.
  4. In the next row, choose the clearing account you've created in the Account field. 
  5. Enter the amount in the Credit field, then choose the supplier in the Name field.
  6. Click Save & Close.

Then, here's how to apply the entry to the existing balance:

  1. Click Vendors/Suppliers, then go to Vendor Center/Supplier Center.
  2. Choose the supplier, then look for the bill.
  3. Open the bill, then click Pay Bill.
  4. Click Set Credits, then you'll find the journal entry in the Credits tab.
  5. Choose it, then click Done.
  6. Click Pay Selected Bills.

Follow the steps for clearing out the A/R amount using the same clearing account. 

 

As always, we recommend consulting with your accountant on the best way to handle this.

 

Feel free to reach out to us. While we can't provide an accounting advice, we want to make sure any technical questions you have about the system are answered.

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

What do you do with the balance remaining in the clearing account?  Adjust it to retained earnings?

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hi there, MaryFerry.

 

Thank you for getting back to the Community. Allow me to step in and help provide additional information about clearing balances in QuickBooks Online.

 

You can still use the Journal Entry feature to clear balances on your Accounts Payable account in the system. While for the offset account, It would best to seek an expert's advice from an accountant to ensure your books will be correct.

 

If this is for vendors with overpayments, you can use the Credit column for the A/P account. You only use the Debit column instead for the account if this is for a vendor with underpayments.

 

To apply the journal entry to the existing debit/credit, you can use the Pay Bills feature.

 

I'm always here anytime you need additional help concerning the A/P account. The Community will be on a lookout on your response.

Frequent Explorer *

Re: Clearing out old transactions from Accounts Payable?

I'm curious about this too!  What did you end up doing with the balance in the clearing account- adjusting to retained earnings?

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

I went back and adjusted to the original expense account.

Active Member

Re: Clearing out old transactions from Accounts Payable?

How do you clear transactions that look like over payments?

The previous bookkeeper credit a payment larger than the bill amount, so it looks like a refund is due.  It isn't, so I can only assume either other bills were paid by this check that were not entered in QB, or P&I were included in the payment.  It's 5 years later, how to I clear AP and AR?

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hello there, FineCarp.

 

Thanks for joining this thread. Allow me to share some insights on how to clear old transactions from your accounts in QuickBooks Online (QBO).

 

If you wish to clear old transactions from your Accounts Payable (AP)/ Accounts Receivable (AR), you can create a clearing account in your QBO. This account is use to move money from one account to another account.

 

Here's how:

  1. Go to Accounting on the left panel.
  2. Select Chart of Accounts.
  3. On the Chart of Accounts screen, click the New tab.
  4. Choose Cash at bank and in hand an Account Type. You may choose any detail type you want for your clearing account.
  5. Type in the Name for the clearing account.
  6. Make sure you do not type in any amount on the balance before clicking Save and Close.

 

Once done, you can create a Journal Entry and apply the clearing account. You can follow the steps provided below:

 

Here's how to create a Journal Entry (JE):

  1. Click the Plus icon.
  2. Choose Journal Entry.
  3. Add the AR or AP from which you are moving money.
  4. Add the Clearing account.
  5. Click Save.

Now you can apply the JE to the existing balance. Let me share again the steps provided by my colleague above:

  1. Go to Expenses.
  2. Choose Suppliers at the top.
  3. Click on the supplier name, and look for the Bill to pay it.
  4. Click the Make Payment button in the top-right corner. When the Bill Payment window opens, the Journal Entry will be under the Credits section.
  5. Select the Bill and the Journal Entry to link them.
  6. Click Save & Close.

However, I'd still recommend checking with an accountant about this for they can provide recommendations as to what account to use for debit and credit.

 

If there's anything else I can help you with or additional questions about the process of clearing transactions from your accounts, just let me know. I'd be more than happy to assist you further.

Active Member

Re: Clearing out old transactions from Accounts Payable?

Thank you for such detail.  I guess my question is, since there isn't a "bill" to pay, do I create a negative bill to account for the "over payments"?  If so, if I use an expense account, it will make my current P&L expense account a negative.

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hello there, FineCarp.

 

You have to create a journal entry to offset your A/P account with your Clearing account, so you'll be able to clear the overpayment. Let me walk you through.

 

To create a clearing account, please refer to @Charies_M for the steps.

 

Then, create a journal entry. Here's how:

  1. Click Create (+).
  2. Click Journal Entry.
  3. In the Account column, select Accounts Payable (A/P), enter the overpayment amount in the Credit column.
  4. Click the vendor's name.
  5. In the next line, select the Clearing Account, then enter the same amount in the Debit column.
  6. Click Save.
  7. Locate open transaction and click Make payment apply the journal entry.
  8. Click Save and close.

Feel free to read this article for your reference: How to record a barter transaction.

 

The Community is always here for you if you have questions. Stay in touch.

 

 

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

Hello,

 

I am trying to clear some small AP vendor balances and I need some help. 

I originally created a journal entry and adjusted the balances to $0. But then I noticed that even if the amount was at $0 the bill still appeared as over 90 days on my aging. I reversed the entry as I thought there had to be another way. I also tried a vendor credit but again the amount keeps showing in 90 days and over. As I keep reading I find that I was doing it originally right and all I was needing was to check the credit on the pay bill section but now as I posted and reversed the entry It does not appear on the pay bill section to select the credit.

 

How can I write off these payables correctly and take them out of my AP Aging?

 

Also, what is the relationship on the Expense/vendor tab between the the total under the vendor name on the left column and the total when I see the detail transactions vendors on the right? Shouldn't these amounts be the same? If I took a vendor payment transaction directly from the bank and applied it to the vendor while coding it to the payable account it shows up as an increase in payable on the transactions to the right but the vendor balance is correct on the left column. Please help me understanding this relationship.

 

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Thank you for the detailed information about your concern, @iankairos.


Yes, you’re correct. Creating the journal entry clears out the supplier’s balances. The likely reason why the amount is no longer showing on the Pay Bill section is that it was already zeroed out.


To keep your account payable's record correct, link the journal entry to the bill payment instead of creating a vendor credit. Since we’re unable to directly link the transaction to the bill payment, create a dummy bill first for the same supplier.

 

Here's how:

 

  1. In your QBO company, click on the Plus icon and select Bill.
    apr.png
  2. Enter the payee’s name in the Supplier field.
  3. Go to the Items details section and input some information in the Description field. For example, dummy bill.
    apr1.png
  4. Make sure not to enter any amount.
  5. Click on Save, then choose the Make payment tab.
    apr2.png
  6. In the Credits section, mark the box for the Journal Entry.
    apr3.png
  7. Once done, click on Save and close.

The Total amount showing on the Suppliers panel is for all open transactions. While the figure displayed under the Total column in Transaction List is the sum of all transactions.

 

With these steps, you'll no longer see the transaction on the on the Accounts payable  ageing Report.


Let me know if you need further assistance with any of these steps. Please know I’m always here to help.

 

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

Hi Rasa-LilaM,

 

Thanks for your response.

 

Unfortunately this did not correct my need, I still do not see the vendor on the pay my bills section. 

I created again the JE, created the Dummy bill at $0 but cannot use the pay my bill section with him.

 

Let me know if there i another way I could fix this.

 

Thanks

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Thank you for following the steps I provided and its result, @iankairos.


To rectify the issue, I’ll have to review how the transactions are entered in your account. However, I’m unable to perform this process here in the Community for the account’s safety.


I suggest contacting our QBO Care Team since they have tools to determine why you’re unable to see the vendor in the Pay Bills window. They can also perform a viewing session to ensure your vendor balance is in order.


To reach them:

 

  1. Log in to your QBO company to get the contact details.
  2. Go to the Help tab at the top, then click on the Contact Us link at the bottom of the page.
  3. Enter contact support in the field box, and choose Let's Talk.
  4. Select on how you want to connect with us: Chat or Call us.

If there’s anything else I can help you with, leave me a comment. I’ll be right here to assist further.

 

Frequent Explorer **

Re: Clearing out old transactions from Accounts Payable?

Hello. After clearing Wrong deposit by connecting Deposit/Credit to an Expense, I balanced Costumer Account to $0.

When I was checking Chart of Accounts, I could see an Expense for that amount sitting uncleared there. 

How to cleared that expense and to keep costumer account on 0?

Thank you

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hello, @ZG10.

 

Good to see you here in the Community. I can help walk you through on how to cleared a transaction in QuickBooks Online (QBO). 

 

Since the expense account still shows as uncleared in the Chart of Accounts (COA), you have an option to change the status to cleared, and it will remain the customer's account on 0.

 

Here's how:

  1. In the left tab, select Banking.
  2. Click Go to Register.
  3. From the Register Name drop-down menu, select the expense account and click OK.
  4. Find the transaction that needs to be cleared.
  5. To highlight click on the transaction.
  6. Click on the top line of the transaction in the field between the Deposit and Payment amount.
  7. On the blank field, you can continually click the field to display a C (cleared).
  8. Click Save and respond to any further questions accordingly.

You can check this article for additional reference on how to change the transaction status: How do I clear, unclear, reconcile or unreconcile transactions?

 

For future reference, you can also visit this article to learn more on about reconciliation: How to reconcile accounts

 

That should do it! Feel free to leave a comment below if you have additional questions about the transaction status. I'd be happy to answer them for you. Have a good one. 

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

In QBO how would you manage this for Accounts Receivable? 

We have some historic customers who paid in advance and then did not use up all their credit. Under our ToS they are not eligible for a refund if any unused credit is unclaimed after a year ... so we need to charge-off these small overpayments (without sending an invoice or refund to the customer!).

Charlie

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Thanks for joining this forum, @Chester_Kay. I'm here to share a few insights about how QuickBooks clear old transactions from accounts receivable (A/R). 

 

Ideally, you'll need to record a refund to your customer using Cheque expense. In your case, since your customers are not eligible for a refund,  you'll need to create a journal entry. Then, set the journal entry to reverse so it will offset the credits. Here's how:

 

Create a journal entry for Accounts Receivable

 

  1. Go to the Plus(+) icon at the top right.
  2. Under Other, select Journal Entry.
  3. Select the Journal Date. Make sure to enter the date of the end of the time period.
  4. Select the account affected by the invoice from the drop-down list in the Account column.
  5. Enter the amount in the Debit column.
  6. Enter the reason for this journal entry in the Memo field.
  7. Select Accounts Receivable from the Accounts drop-down list. The amount will be entered automatically in the Credits column. 
  8. Select the customer from the drop-down list in the Name field.
  9. Click Save and close.

 

Set the journal entry to reverse

 

  1. Click the Search icon in the upper right. 
  2. Find the journal entry you created and click to open it.
  3. Choose Reverse.
  4. Edit the Journal Date to one day after the original journal entry's Journal Date.
  5. Click Save and Close.

 

To ensure your books are accurate, I'd highly recommend you speak with your accountant. He/She should be able to provide you more expert ways of handling this situation.

 

Let me know if you have any other questions. We're always glad to assist. Take care. 

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

Thank you for the feedback & insights @katherinejoyceO 

 

I do have a couple of questions...  

Step 4 of the procedure states:

  "Select the account affected by the invoice from the drop-down list in the Account column."

my question is: how can I find out which account that was?

 

My other question is, can I just make the customer Inactive instead?

 

 

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hey Chester_Kay, 

 

The account here is the account on the product/service selected on the invoice, to see what this go to Sales > Product and Services > Edit to see where this posts to. 

 

If you don't have any billable expenses posted against the customers you can make these inactive. When you make a customer with a non-zero balance inactive QuickBooks will create an adjusting transaction for the amount of the balance.

 

Thanks :)