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Frequent Explorer *

Credit memo for AIA billing Invoice

Re: We are a general Electrical Company that uses AIA billing. After talking to the prime contractor the boss decided to drop his price or do some items for free. How do you reflect this ? Do I create a credit memo to the invoice , credit memo on the Estimate or just change the numbers on the estimate?

QuickBooks Team

Re: Credit memo for AIA billing Invoice

Hello there, @vjarboe1.


Allow me to share some information on how QuickBooks handles


First of all, an estimate is not a posting transaction. Thus, credit memo will not applied on it. If your company implement price rollback or change, you can apply this on the Estimate. By doing so, changes will be applied on the current and future estimate and invoices.


To close the balance of the invoices you already sent to your customer, you can either create a credit memo or write a bad debt.


If you decide to give some free items, this simply means you'll no longer be collecting payments for it. Thus, you can write the transaction off and declare it as bad debt so you can clear the invoice out of your accounts receivable.


Here's how:

  1. Create an account for bad debt.
    1. Go to Lists menu.
    2. Select Chart of Accounts.
    3. In the Chart of Accounts window, right-click anywhere and choose New.
    4. In the Add New Account window, click the Expense radio button then choose Continue.
    5. Assign the appropriate account number.
    6. Type in Bad Debt in the Account Name field.
    7. Click Save & Close.
  2. Record the bad debt.
    1. Click the Customers menu.
    2. Choose Receive Payments.
    3. Select the name of the customer from whom you incurred the bad debt.
    4. Leave the amount field at 0.00.
    5. Highlight the line item that will not be paid.
    6. Click the Discount & Credits Button.
    7. On the Discount tab, enter the bad debt amount in the Amount of Discountfield.
    8. In the Discount Account drop-down, choose the bad debt expense account created in Step 1, then click Done.
    9. Hit Save & Close.

Feel free to visit us here in the Community if you have other questions about managing your Account Receivables transactions. I'm here to help.

Frequent Explorer *

Re: Credit memo for AIA billing Invoice

I have explained all of this to a worker and sbe claims "NO"

The job in question is on its

3rd AIA billing cycle. 

The invoice was questioned and the boss made an agreed for some of the items change price, remoed items etc).

My coworker says to do a credit on the estimate.

I tell her to do a credit on the INVOICE TO reflect the change.

The free items will be bad debt.


Which one is correct? Or what is the correct way.

QuickBooks Team

Re: Credit memo for AIA billing Invoice

Hello there, vjarboe1.


Thanks for coming back with those details. Let me help clarify things for you. 


You're on the right track in handling credit memo for billing invoices. In your case, you'll just need to create a credit memo. There's no need to write a bad debt since you only change the invoice price.


You should be all set. If you have additional questions about this, just let me know as I'm always here to help.