Unapplied cash payment income on your profit and loss

When running a Profit and Loss report using the cash method, you might see an account called Unapplied cash payment income. This account is created by QuickBooks for proper tax reporting.

Unapplied cash payment income may appear on your report if:

• A customer prepaid you and you recorded the payment before creating the sales form (invoice or sales receipt).
• You entered payments without matching them to sales forms.

How to resolve Unapplied Cash Payment Income

Follow these steps to find and apply outstanding customer payments to the correct sales forms.

Step 1: Find unapplied cash payments on the Open Invoices report

1. Follow this link to complete the steps in product
2. From the Type report name here ▼ dropdown, enter Open Invoices and select it.
3. Select the report period from the Report period ▼ dropdown.
4. In the Transaction type column, locate any transaction listed as a Payment.
5. Check if that Payment transaction has a matching open invoice listed on the report.
   • If a matching invoice exists: Continue to Step 2.
   • If a matching invoice doesn't exist: Skip to Step 3.

Step 2: If the Payment transaction matches an open invoice

If that payment matches an open invoice, follow these steps.

1. Select the payment date from the Date column to open the transaction.
2. Under Outstanding Transactions, select the checkbox for the correct open invoice if not selected.
3. Select Save and close.
4. Check your Open Invoices report to see if there are any more transactions listed as a Payment.
5. If there are, repeat these steps for each one.

Step 3: If the Payment transaction doesn’t match an open invoice

If the payment doesn’t match an open invoice, you’ll need to create the transaction. Follow these steps: 

Create the invoice

1. Select + New or + Create.
2. Select Invoice.
3. Fill out the form with the same customer, amount, and date as the unapplied payment.
4. Select Save and close.

Apply the payment to the new invoice

1. Go back to the Open Invoices report.
2. Find the unapplied payment and select its date to open it.
3. Under Outstanding Transactions, select the checkbox for the invoice you just created if not selected.
4. Select Save and close.

Step 4: Check your Profit and Loss report

After applying all unapplied payments, run your Profit and Loss report again. The Unapplied cash payment income account should no longer be on the report.