Clearing Past due invoices that are paid

We appreciate you reaching out here with your concern, cfoland. I'm here to share details to help your guide when clearing past-due invoices from previous years.

Before closing your financial books for a specific fiscal year, it's best to ensure all transactions and accounts are reviewed and categorized to prevent any discrepancies in the future run. Since your accounting data has already been closed and reconciled, clearing these past-due invoices that are paid is best handled by your accounting professional. With this, we recommend consulting your accountant to further provide you with proper guidance in managing these entries and accounts in your company file. This way, your books will maintain their accuracy and be ready for the next fiscal year.

Moreover, I'll be sharing this relevant article to help you and your accountant prepare your books and ensure they're ready for the next fiscal year: Year-end guide for QuickBooks Desktop.

We'd love to hear more from you if you have additional queries or other QuickBooks-related concerns. Feel free to leave us a comment below, and we'll get back to help you further. Keep safe!

@cfoland 

Make a journal entry and debit the account assigned to the deposit and credit A/R.  List the Job under the NAME column on the A/R line.  You should now have the credit to apply to the open invoices and that will remove them from your A/R aging reports.   

The account assigned to the deposit was an A/R account. Quickbooks will not allow me to Debit and Credit 2 A/R accounts in the same JE. My issue is that a "deposit" was posted to the customer instead of a "payment" being applied to the invoices for the customers Job. Now I have a large amount of invoices that have been paid but still show as past due in QB. I can not delete the deposit and then receive the payment properly because the transaction took place in 2022. Tried creating a CM to "apply" to the invoice and that would not work.

Thank you! I was wondering if that would work. I really appreciate the help.

@cfoland 

My pleasure.  Happy to help.

@cfoland 

I forgot to mention that you will need to close out the A/R credit from the original deposit that was posted to the wrong customer's A/R account or it will continue to show on your A/R aging reports.  You should see both the original deposit and the JE when you go to New > Receive payment.   

You are right! I had not thought that far ahead. I assume that would be another two JE situation.

Thanks again!

Hi, Rainflurry.

I appreciate you for always sharing your knowledge about QuickBooks. This will definitely help other users as well in the future. Please keep on posting here in the Community.

Stay safe and have a great rest of the day.

can you explain it in laymans terms. 

Hello there, @cfoland.

Allow me to chime in and share some information about clearing past-due invoices that are paid in QuickBooks Desktop (QBDT).

We can create two journal entries (JE) to clear out past-due invoices that are paid. The first JE is debit under AR while the other is Clearing Account under credit. A Clearing Account is an account you use to move money from one account to another account when you cannot move the money directly. This account has typically a balance of $0.00 because you always take out the exact amount that you put in. It may also be called a Barter or Wash Account.

Here's how to create a JE:
 

1. Go to the Company menu and select Make General Journal Entries.
2. Fill out the fields to create your journal entry. Make sure your debits equal your credits when you’re done.
3. Select Save or Save & Close.

Once done, we can now create a Clearing account.

1. From the Lists menu, select Chart of Accounts.
2. Right click anywhere in the Chart of Accounts, then select New.
3. In the Add New Account window, select the Bank radio button.
   Note: While you can choose from several types of accounts, the best is a bank account because of the following reasons:
   • You can pay into a bank account via Receive Payments or Make Deposits.
   • You can pay out of a bank account via Write Checks or Pay Bills.
   • A bank account appears on the balance sheet and on the statement of cash flows to balances and changes in balances.
   • To allocate expenses to overhead or class using a zero check, you must use a bank account as your Clearing account.
4. Select Continue.
5. In the Account Name field, enter Clearing Account, Barter Account or Wash Account.
6. Do NOT enter an opening balance.
7. Select Save & Close.
    

To use a clearing account

1. Create a journal entry.
2. Add the AR or AP from which you are moving money.
3. Add the Clearing account.
4. Save the Journal Entry.
5. Create a second Journal Entry.
6. Add the Clearing Account.
7. Add the AR or AP account to which you moving money.
8. In either Pay Bills or Receive Payments, link the Journal Entries together.

I've also added an article for more information about clearing accounts: Set up a clearing account.

Additionally, you check this article that explains if what is the use of clearing accounts:  Why use clearing accounts in your accounting system for PayPal, credit cards, and other payment chan...

Should you require additional support in handling Journal Entries don't hesitate to reach out to me again. I've got you covered.