Resolve accounts receivable or accounts payable balances on a cash basis balance sheet in QuickBooks Online
by Intuit•39• Updated 1 month ago
Learn how to fix an Accounts Receivable (AR) or Accounts Payable (AP) balance on a cash basis balance sheet.
An issue with the balance is typically caused by one of two things: an accounts payable or accounts receivable transaction has affected the balance sheet account, or there's an unapplied payment.
Transactions affecting a balance sheet
An AR or AP balance on a cash basis balance sheet may be caused by an AR or AP transaction.
As soon as the entry is saved, the accounts receivable or accounts payable account shows a positive balance until you receive payment or pay the bill.
Common examples are:
- Sales Tax: Normally reported under Sales Agency Tax Payable, a liability account.
- Security Deposits: Often entered on invoices using a product/service item that is reported under a security deposit liability account.
- Retainers: Often entered using a product/service item that is reported under a liability account.
- Asset Purchase: A bill entered to purchase an asset.
In these cases, the balance can be left where it is. Such balances have no effect on the Profit and Loss report, which is the main focus of cash basis, not having a zero balance in accounts receivable or accounts payable. Your accountant can reverse the Accounts Receivable (A/R) or Accounts Payable (A/P) balances using the proper accounts when doing your taxes.
It's not a good idea to try to correct these accounts with a journal entry, especially for sales tax, as every customer account with a sales tax balance would have to have an individual line item entry made to it.
However, if you decide to create a journal entry, you should enter a date of the end of the time period, and set it to reverse on the following day. For invoices, the journal entry debits the account affected by the invoice and credits accounts receivable, while, for bill entries, it credits the asset account and debits accounts payable.
Warning: It is important to consult an accountant before trying to correct these accounts with a journal entry.
The following sections outline the steps to create and then reverse the journal entry. To see the steps, select the option below:
Set the journal entry to reverse
Once the accounts receivable or accounts payable journal entry is created, you must set it to reverse:
- Select Search icon in the toolbar.
- Locate the journal entry you created and select it to open it.
- Select Reverse.
- Change the Journal date to one day after the original journal entry's Journal date.
- Select Save and close.
The journal entry you created will be reversed as you specified.
Unapplied payments
The second most common cause of a balance in accounts receivable or accounts payable is unapplied payments.
Bill payments that aren't applied to bills, or receive payment entries that aren't applied to invoices affect accounts payable and accounts receivable negatively. You can correct this situation by opening the payments from the Customer or Vendor registers and applying them.
Occasionally, unapplied payments are caused when you do not enter the corresponding invoices or bills. To correct this situation, you must enter the missing invoices or bills before you can apply the payments to them.
The following sections provide information about finding and addressing unapplied payments.
Find unapplied payments
To find unapplied payments, review the Customer Balance Detail or Vendor Balance Detail report.
- Go to Business overview, and select Reports (Take me there).
- Locate and select either the Customer Balance Detail or Vendor Balance Detail report.
- Review the report to identify any unapplied payments.
Once you have identified unapplied payments, you can apply them in Accounts Receivable (A/R) or Accounts Payable (A/P). To see the steps, select the option below:
Review Transaction Reports
The Transaction Report can show you the customer or vendor balance that creates a total in accounts receivable or accounts payable.
- Go to Business overview, and select Reports (Take me there).
- Locate and open the Balance Sheet report.
- Select the amount listed for the Accounts Receivable (A/R) or Accounts Payable (A/P) account to open Transaction Report for that account.
- Select Customize.
- In the Customize report panel, select the Rows/Columns item to open the section.
- From the Group by dropdown list, select Customer for accounts receivable or Vendor for accounts payable.
- Select Run report.
You can use the information in the report to identify the cause of the balance and decide what action is necessary.
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