Transferring funds between A/P accounts

d.riseberg · ‎September 08, 2021

Last year at this time, I asked the same question. At the time I thought I had the answer correct, but in fact, it is wrong.

We are an animal rescue. We have 2 checking accounts and 2 corresponding A/R and A/P accounts. One account is for strictly grant funds, so there is a Grant Receivable account and Grants Payable. The 2nd account is for all other expenses, so they are the standard A/R and A/P.

We have a grant that allows us to pay for spay or neuter of cats and dogs. Cats are paid in full, dogs have a $75.00 co-pay. Our veterinarian charges all our expenses to our credit card. When we are billed for the dogs, our vet will credit us the $75 when a co-payment is made, then charge us the full spay/neuter charge. It is easier for them, terribly confusing for me trying to keep track of which co-payment goes with who. Especially when I don't get any of the credit notices stating who they are for. I simply see a $75, $150 or $225 credit appear on the balance forward.

When we receive our billing statement, our vet will charge us for any services done since the last billing, including the co-pay credits.

This most recent billing statement included 4, $75.00 co-pays plus a $20.00 credit for an overcharge, on the Grant account. Total credits are $320.00. This billing only had $87.50 of charges against the grant, leaving a credit balance in the grant account of $232.50.

Our charges under the regular account total $414.70. Since all the bills and credits run together, the CC was charged $182.20 ($414.70-$232.50=$182.20)

Last time I created a dummy bill in the grant account equal to the credit, then created a credit in the regular account for the same amount. I am now realizing, that doesn't work.

When the new bill comes in that corresponds to those dummy charges, the grant account will ultimately be paying twice for the same charges.

I need a way to correctly balance the 2 accounts for the correct amount without causing a duplicate charge or credit to either account.

Thanks

LieraMarie_A · ‎September 08, 2021

Hi, @d.riseberg. I'm here to help you transfer funds between Accounts Payable (A/P) accounts.

I'd suggest setting up a clearing account. This account is used to move money from one account to another account when you cannot move the money directly. In your case, you can use a clearing account to move an amount from one A/P account to another A/P account.

To set up a clearing account

From the Lists menu, select Chart of Accounts.
Right-click anywhere in the Chart of Accounts, then select New.
In the Add New Account window, select the Bank radio button.
Select Continue.
In the Account Name field, enter Clearing Account.
Do NOT enter an opening balance.
Select Save & Close.

To use the clearing account, follow the steps in this article: Set up a clearing account. Upon sharing this, I still suggest consulting your accountant. He/She might have specific instructions on how to handle journal entries and credits. This is to ensure your records are accurate and balanced.

Get back to me if you need any further help with transferring funds. I'll be around to answer them all for you. Keep safe and have a good one.

LieraMarie_A · ‎September 09, 2021

Hi @d.riseberg,

Hope you’re doing great. I wanted to see how everything is going about transferring funds between two A/P. Was it resolved? Do you need any additional help or clarification? If you do, just let me know. I’d be happy to help you at anytime.

Looking forward to your reply. Have a pleasant day ahead.

d.riseberg · ‎September 10, 2021

I was able to set up the clearing account, and entered the credits and debits as they needed to be, to move the funds between accounts.

Somehow, I'm just not understanding how, in the long run, it will work out. When our vet finally does the spay or neuter, he is going to charge me the full amount. Unfortunately, I've transferred out the credits that would normally counter the first $75.00 for each dog from the Grants Payable to the regular A/P account. In my mind, I feel as if I'm charging the grant the full amount vs, an amount after the co-payment.

Could you please explain how the funds will ultimately be correct?

Thanks

Archie_B · ‎September 10, 2021

Hello there, d.riseberg.

Let me share what I know about clearing account in QuickBooks.

Clearing account is what we also called as Wash Account. This account normally has zero balance because you always take out the same amount you put in it. You need a clearing account in QuickBooks because the program will not let you record transactions that contain two A/P accounts.

That being said, it's the best way to record and manage two A/P accounts in QuickBooks. I've added this article to learn more about the common uses for a clearing account: Set up a clearing account.

You can also look for an accountant that also uses QuickBooks. This way, you can consult and look for other specific options in handling two A/P accounts in QuickBooks.

Get back to us if your still have other questions about it. We're always here to help. Have a wonderful weekend.

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