Clear Old Vendor Bills Already Paid

@Cindy316 

"Bills were entered through AP module, Db expense accounts. Some payments were made via ACH, debit, or credit card on the vendor websites not through QBDT. And the payments were entered as journal entries, Db AP and Cr either credit or debit account."

What do you mean by "A/P Module"?  Are you entering bills by going to Vendor > Enter Bills or clicking the Enter Bills icon on the home screen?  When you pay bills in QB, you should use Pay Bills (either click the Pay Bills icon on the home screen or go to Vendor > Pay Bills) and not a journal entry.  When you use Pay Bills, QB creates the journal entry that you're entering (debit A/P, credit payment account), but it also applies the payment to the bill and closes it out.  You're doubling your work by making a journal entry and then applying it to the bill.  Pay Bills does that in one entry.  All of your questions seem to be as a result of the unnecessary journal entry you're creating so, unless you must use a journal entry to pay bills for some reason, this hopefully answers your other questions.      

I appreciate the detailed information you've shared, Cindy. I'm here to ensure that this will be addressed promptly.

As Rainflurry mentioned, when you're using QuickBooks to pay bills, it's important to use the Pay Bills option and not the Journal Entry (JE) option to clear it. This is because paying bills with this feature does two things: it creates a JE and it applies the payment to the bill, closing it out. This simplifies the process by eliminating the need to create a JE and then apply it to the bill separately. 

To link or apply the JE payment to the bill using the Pay Bills feature, here's how: 

1. Hover over to the Vendors menu, then select Pay Bills.
2. Choose the accounts payable account from the dropdown and check the boxes of the bills you want to pay.
3. Apply any Discounts or Credits that you want to use.
4. Enter the date you paid the bill.
5. Choose your payment method from the list: Check, Credit Card, Online Bill Payment, Online Bank Payment, Cash, Debit or ATM card, PayPal, or EFT.
6. Click Pay Selected Bills.
7. If you have more bills to pay, click Pay More Bills. Otherwise, click Done. 

If you're experiencing issues or have questions about paying bills in QuickBooks, it's crucial to understand that this can be a result of the unnecessary JE you're creating. Unless you have a specific reason for using a JE to pay bills, it's best to stick with the Pay Bills to streamline your workflow and ensure that your finances are accurate and up-to-date.

Furthermore, paying bills is part of your usual accounts payable workflow in QuickBooks Desktop (QBDT). For more information on vendor-related transactions and workflows, you can refer to this article: Account Payable Workflow.

If you have further questions about bills in QBDT, please don't hesitate to reach out to us. The Community is always available to help. Keep safe. 

Rainflurry - Thanks for you insight!!!

I'm new here. My boss asked me to clean up the A/P mess. The previous bookkeeper used Enter Bills to enter bills; some of those old bills are still hanging out there because she made the payments via credit or debit card on the vendor websites and booked the payments as journal entries. We still don't have any credit or debit card set up in QB. Do you know the correct way to clear out those old bills? Thank you so much and have a nice day!

Hmm I don't see my reply...Let me try again.

Rainflurry - Thanks for your insight!!!

I'm new here. My boss asked me to clean up the A/P mess. The previous bookkeeper used Enter Bills to enter bills; some of those old bills are still hanging out there because she made the payments via credit or debit card on the vendor websites and booked the payments as journal entries. We still don't have any credit or debit card set up in QB. Do you know the correct way to clear out those old bills? Thank you so much and have a nice day!

@Cindy316 

Clear the old bills by going to Pay Bills.  When you click on a bill, in the box below, you should see credits available.  If you don't see credits available, then the journal entry didn't debit A/P for that vendor.  To apply the payment created by the journal entry, click on 'Set Credits' and apply them.  That's it. 

Thanks Rainflurry. I did all that...But what about the Method? Please read the paragraph below from my original post. What I really wanted to know is what to do so I could choose Debit Card or Credit Card instead of Check under Method because the payment was made either with a debit or credit card.  Perhaps we need to have the credit and debit cards set up in QB then we can choose??? Thank you.

"To zero out a bill paid via credit/debit account and payment was entered as a journal entry like I’ve mentioned above, I clicked on Set Credits, and applied the credit to the bill. On the bottom of the Pay Bills screen, under Method, in the box, there are Scheduled Online Payment, Check, and Credit Card. Since we don’t have any *credit or debit account* set up in QB, I couldn't choose Credit Card so I had to choose Check instead and clicked Pay Selected Bills.  The bill is taken off from the AP Aging report and in G/L it’s showing Bill Pmt-Check in the Type column. I’m not sure if I did it correctly and its showing Bill Pmt-Check in G/L is acceptable since it was actually paid via credit/debit."  

Thanks Jelayca. It looks like I wasn't clear enough. Sorry, but your reply doesn't appear to answer my question.  

I have a related question regarding clearing old bills. How can I clear old bills that were paid by credit card but were never linked to the vendor invoices? Instead, the payments were recorded as expenses rather than applied to the invoices. The bills were from 2024, and the books have closed.

Hi there, @AnneB8. You can clear those old bills by linking the original expenses to them. 

To do this, open the Credit Card Expense transaction and change the Account from the original expense (e.g., Job Materials) to Accounts Payable so you can apply this to the bill as a credit.

After saving, proceed to the Bill Payments section on the Vendor Information page and apply the expense as a credit to the bill using Set Credits. This will create a zero balance payment and automatically close both the expense and the bill.

Additionally, I highly recommend consulting your accountant first to ensure this doesn't conflict with your filed tax returns. Since these are from a closed year (2024), changing the category will alter your 2024 Profit & Loss.

You’re welcome to reach out if you have any further questions or additional clarification. We’re always here to help.

@AnneB8 

The response from @ArnoldJohn_C will change both your 2024 P&L and balance sheet, so you don't want to do that.

If the business is on accrual basis, the expenses were double-counted in 2024 (once on the bill and again when the cc payments were made), thereby underreporting the business's net income and, therefore, its tax liability to the business/shareholders. 

Regardless if the business is on cash or accrual basis, the best way to fix this is to create vendor credits dated 2026, using the same accounts/items as the 2024 bills, and then apply those credits to the 2024 vendor bills.  If there are inventory items on the bills, then you will have to determine the proper account(s) because you don't want to put those items back into inventory. 

If you're on cash basis, the credits will offset the bills, and nothing will hit the books in 2024 or 2026 (expenses will offset in 2026, netting to $0).  If you're on accrual basis, the overreported expenses from 2024 will be reversed in 2026.  

Thank you, ArnoldJohnC, but I’m using QBO, not the desktop version.

Thank you, Rainflurry. In some cases, a deposit was paid by check, and the remaining balance by credit card; this method seems less confusing. 

Since we haven't closed the books for 2025, should I make the adjustments in December 2025?

The reconciliations have been completed, but the tax return has not yet been filed.

Hi there, AnnB8. I agree with Rainflurry’s approach. You can use vendor credits dated in 2026 to clear those 2024 bills. Currently, those old bills appear as unpaid. Once you apply the credit, it will be marked as Paid and removed from your open balances.

When creating the vendor credit, ensure it uses the exact same accounts or items as the 2024 expense transaction. Here’s how: 
 

1. Go to the + Create.
2. Select Vendor credit.
3. In the Vendor dropdown, select the vendor.
4. Enter the Category or Item details for the credit.
5. Select Save and close.
    

Once done, apply the credit to the bill. 

Regarding the 2025 adjustment, I recommend consulting your accountant so they can assist and advise you, ensuring your tax return remains accurate.

If you have additional questions, don’t hesitate to revisit this thread.