Correct incorrect payment with two company files

I appreciate you taking the time to post here in the Community @smorgan01. I'm here to help guide you through the process of correcting the payment and ensuring both of your company ledgers accurately reflect the transaction.

Accidentally paying a vendor from the wrong company’s account is a common issue and can certainly be sorted out with some careful adjustments in your accounting records.

Here’s a step-by-step approach to correct the payment and ensure both company records are accurate:

In your Company 2:

       1. Create a liability account to record the loan from Company 1.

       2. Create a check using the vendor.

       3. Pay the bills and then apply any necessary credits.

       4. Record a deposit from Company 1 to Company 2 by using the liability account created for the loan.

       5. Click Save and Close.

Additionally, you can refer to this article on tracking the loan amount and recording your payments: Manually track loans in QuickBooks Desktop.

Furthermore, it’s advisable to carry out the reconciliation process regularly to ensure that your QBO balance aligns with your actual bank account balance. For a comprehensive guide, please refer to this link: Learn the reconcile workflow in QuickBooks. 

Thank you for your attention to detail. Please feel free to reach out if you have any further questions or need more assistance regarding your POs. We are available 24/7.

In looking at these steps.  I am assuming that I need to do this in the Company 1 not 2.  If I am reading this correctly, I will be creating the check in the company that I should have paid the bill in the first place.  That would allow for me to deposit the check in to Company 2 which is where I should not have paid the bill from. So now it would be a reimbursement.  Is this correct. .  

The approach you’ve outlined is correct, @smorgan01. You will create the check in Company 1, where the bill from the Purchase Order (PO) should have been paid originally, and then record it as reimbursement to Company 2, where the payment was inadvertently made. I understand the need for accuracy in recording this process, and I want to help you achieve just that.

First, here's a general overview of what should be the process in Company 1 followed by the specific steps:

Step 1. Create a liability account.

1. Go to the Lists menu. Then, Chart of accounts.
2. Right-click, and select New.
3. Select the Other Account Types radio button and choose Other Current Liability from the drop-down list.
4. Click on Continue.
5. Enter an appropriate account name (e.g., Due to Company 2) and other relevant details. You can leave the opening balance blank.
6. Hit Save & Close.

Step 2. Record the expense and liability.

1. Go to the Company menu. Then, choose Make General Journal Entries.
2. Pick the expense account from the bill or purchase order on the first row and enter the debit amount.
3. Select the liability account recently created in the second row and credit it for the same amount.
4. Type in a memo for tracking purposes.
5. Hit Save & Close.

Step 3. Reimburse Company 2.

1. Select Banking. Then, Write Checks.
2. Choose the Bank Account from which the payment will be made.
3. In the Pay to the Order of field:
   a. Pick New from the dropdown, and Other.
   b. Enter the name of Company 2.
4. In the Expenses tab, choose the liability account created earlier.
5. Type in the Amount.
6. Optionally, add a memo to indicate that this payment is to reimburse Company 2 for the expense paid on behalf of Company 1.
7. Hit Save & Close.

Next, here's the overview of the process in Company 2 and its steps:

Step 1. Create an asset account.

1. Go to the Lists menu. Then, Chart of accounts.
2. Right-click, and select New.
3. Select the Other Account Types radio button and choose Other Current Asset from the list.
4. Click on Continue. 
5. Enter an appropriate account name (e.g., Receivable from Company 1) and other relevant details. You can leave the opening balance blank.
6. Hit Save & Close.

Step 2. Record the reimbursement from Company 1.

1. Go to the Company menu. Then, choose Make General Journal Entries.
2. Select the receivable account recently created and enter the debit amount.
3. Credit the appropriate bank account for the same amount.
4. Type in a memo for tracking purposes.
5. Hit Save & Close.

Step 3. Record the reimbursement received.

1. Go to Banking. Then, pick Make Deposits.
2. Select the bank account where the reimbursement from Company 1 will be deposited from the Deposit To list.
3. Enter the date of the deposit.
4. Select the receivable account in the From Account column.
5. Enter the amount received.
6. Add a memo indicating that this is a reimbursement from Company 1 for a mistaken payment.
7. Hit Save & Close.

To ensure accuracy, I also encourage collaborating with your accountant when going through the steps.

If you need to combine financial reports for your companies after this, I'm adding this article as a guide: Combine reports from multiple company files.

Perhaps these details are quite lengthy, but I hope these details help you accurately record the mistaken PO payment. If you need further clarification or have other questions in mind, feel free to click on the Reply button. We're committed to offering ongoing support. Take care!