How do you correct a negative Accounts Receivable because of an Unapplied Cash Payment of Previous Years due to deleted invoice?

Hello there, @Majella. Allow me to share some insights in correcting your negative accounts receivable.

The best way to approach this is by creating a Journal entry. Here's how:

1. Click the + New button, then select Journal Entry (JE).
2. On the first line, choose an Offset Account for the credit and the Accounts Receivable for the debit.
3. Input the amounts, then choose the customer's name.
4. Select Save and close.

I recommend consulting your accountant to help you choose the accounts and the process.

Then, let's do a Receive Payment transaction to link the JE we created:

1. Click the + New button, then select Receive payment.
2. Choose the customer.
3. Tick the box of the JE.

For future reference, here's a guide on getting a copy of your JE: Print a journal entry report in QuickBooks Online.

Let me know if you have further concerns about your invoice. I'll be here to provide information. Have a great day!

I already did this, but it resulted to an unapplied Cash Payment Income in my P&L statement (Cash Basis).

I admire you for going through the steps shared by my colleague above, Majella. Allow me to join you in this thread and share the possible cause of the issue.

When creating the journal entry in QuickBooks Online, may I know the date or the reporting period you used? This information could potentially explain the occurrence of unapplied entries. It is important to note that for accrual-based businesses reporting on a cash basis, it is advisable that the entry is dated in the current year (2023) to avoid impacting the 2021 and 2022 financials.

In addition to the method mentioned, creating an invoice for 2023 statements is a viable approach. It won't affect your previous closed books but will clear the unapplied payment and remove the negative balance from the customer's account.

If you have further questions about A/R or any concerns, you can always reply to this post. I'll be willing to lend a hand. Have a good one!

@Majella 

"I cannot create an invoice for 2021 because it will affect the 2021 and 2022 statements."

Creating an invoice dated 2021 and applying the payment to it, will not affect any cash basis statements.  It will only change the 2021 P&L by changing the income from 'Unapplied Cash Payment Income' to whatever income accounts are assigned to the invoice items.  It won't change net income.  Also, their cash basis balance sheet will be unaffected as well.  It will zero out A/R on accrual basis reports.  You can also create an invoice dated 2023 and apply the payment to that.  That will leave the income from the 2021 payment as 'Unapplied Cash Payment Income' on the 2021 P&L and the ($2,500) A/R balance will remain until you apply the 2021 payment to the 2023 invoice.