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KSK
Established Member

Payment received, deposited to bank account but not applied to invoice - how to correct afterwards?

Hello, we're working in QBO and have a situation where a customers check was received by a partner and remotely direct deposited into our bank account.  However, that check was incorrectly added to QBO via an electronic download from our bank and was never applied to the customer's invoice.  Months have gone by and we need to figure how to apply the now reconciled deposit against the customer's outstanding invoice? Do we simply create a credit memo and apply it or is it necessary to create some type of journal entry?  Any advice would be appreciated.  Thanks!

Solved
Best answer 01-26-2018

Accepted Solutions
QuickBooks Team

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Hi there, KSK,

 

You've come to the right place, I'd love to help apply the deposit to the invoice to remove the outstanding balance.

 

Let's first locate the deposit, here's how:

 

  1. Click Accounting on the left panel.
  2. Locate the bank account where the payment was direct deposited into, then click View register.
  3. Locate the deposit and click it.
  4. Click Edit.

 

After that, let's link the deposit to the invoice. I'll walk you through:

 

  1. Select the customer from the Received From column.
  2. Select Accounts Receivable from the Account column.
  3. Click Save and close.
  4. Click the plus (+) icon.
  5. Select Receive Payment.
  6. Select the customer.
  7. Place a check next to the invoice and deposit.
  8. Click Save and close.

 

Now, the invoice is marked as paid. I've added this article for your future reference: Linking a Deposit to an Invoice

 

Thanks for giving me the opportunity to help. I'm here anytime to need further assistance with QuickBooks Online.

 

 

 

 

15 Comments
QuickBooks Team

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Hi there, KSK,

 

You've come to the right place, I'd love to help apply the deposit to the invoice to remove the outstanding balance.

 

Let's first locate the deposit, here's how:

 

  1. Click Accounting on the left panel.
  2. Locate the bank account where the payment was direct deposited into, then click View register.
  3. Locate the deposit and click it.
  4. Click Edit.

 

After that, let's link the deposit to the invoice. I'll walk you through:

 

  1. Select the customer from the Received From column.
  2. Select Accounts Receivable from the Account column.
  3. Click Save and close.
  4. Click the plus (+) icon.
  5. Select Receive Payment.
  6. Select the customer.
  7. Place a check next to the invoice and deposit.
  8. Click Save and close.

 

Now, the invoice is marked as paid. I've added this article for your future reference: Linking a Deposit to an Invoice

 

Thanks for giving me the opportunity to help. I'm here anytime to need further assistance with QuickBooks Online.

 

 

 

 

TWH
Active Member

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Thanx for the answer. I have a follow-on question. We pay sales commission based on the cash receipts. In the above scenario let's assume an invoice is dated in January, the cash was ACTUALLY received in March, but not credited to the invoice until July. I am concerned that the system will (despite the books being long closed for March) record this as a cash sale in March. How do I get this 'fix' to show the cash sale in July; the month the issue was resolved?

QuickBooks Team

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Hi there, @TWH,


I’m glad to share how QuickBooks Online (QBO) reports the sales once you receive the invoice payments.


QBO reports the sales based on the accounting method of the company. If you’re set up for Accrual method, the sales are recorded at the time you enter the invoice regardless of whether it’s paid or not.


Cash method reports the sales at the time you receive payments. It doesn’t matter whether the payments have been deposited to the bank account or not.


In the scenario above, the cash sales will be reported in March if you select Cash method. You’ll see the sales posted in January when you select Accrual.


You can check Choose between cash and accrual accounting methods in reports for more information.


To show the cash sales in July, you’ll have to set the payment date to this specific month. Then, run the sales report in Cash accounting method.


I’ve added some examples in the screenshots below.

1.jpg 2.jpg 3.jpg

 

I also recommend consulting an accountant before making any changes to the invoices or payments. We need to ensure the books are still accurate since they were already closed last March.


Don’t hesitate to let me know if there’s anything else you need. You can mention my name (@MichelleT) if you have additional questions, and I’ll be sure to get back to you.

 

Experienced Member

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

I would love this answer for the desktop version, which does not have an 'Accounting' option in the left sidebar.

Active Member

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

When I follow the steps outlined in your first 4 steps QB says I should "receive payment" first.  Im confused?

Community Explorer **

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

I have two direct deposit payments that were applied to the invoices and show up on my bank statement but not in my check register. Because of this I cannot reconcile my bank account. Why would this happen?

Community Contributor **

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Hi Michelle, 

 

I tried following your instructions however, it gave me the RED are you sure you want to do this because you've already reconciled message.

 

I have this issue for all of 2018 so I need to figure out how to fix all the deposits so the Customer Account balances are accurate. I already show the Customer in the Received From column and I show Consulting Income in the Account column. I'm guessing that with the auto download transactions from a bank account that you still need to receive payments first before accepting the deposits, even though you select the customer in the Received From column. Anyways...I also don't know where the plus (+) icon is that you are referring to ~ it sounds like it might open a Receive Payment option? 

 

Is it even possible to correct these after the bank account has already been reconciled, without throwing off balances? If not, maybe I can do journal entries to fix it? My client's previous QB account had decades of information in it and it was throwing off tax returns so I went in and recreated the entire year for 2017 and was hoping to start clean but now I have this deposit issue. Any advice you can give me would be greatly appreciated!!

Community Contributor **

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Is it waiting for your to approve the transactions? You should see them under Banking on the left side and then make sure you're looking at the For Review tab. 

Community Contributor **

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Sorry but I think I just figured out what I was doing wrong and what you meant by the plus (+) (duh!) I didn't realize you still need to Receive Customer Payments and do the manual deposits and then match the deposits to the downloaded deposits. I assume that if I simply made sure the downloaded deposit had the right customer/invoice selected that it would all be done. Now I just have to figure out if I can fix all of these for 2018 without throwing off my reconciliation balances. Any ideas?

Moderator

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Hello cornerstonemgmtg,

 

You get this error when trying to make some changes on a reconciled bank account. It'll definitely adjust the balance and create discrepancy. 

 

This is how you should receive and match the deposits.

  1. Create an invoice.
  2. Receive payment  and choose Undeposited Funds in the Deposit to field. 
  3. Make a deposit by clicking on the Plus icon and then Bank Deposit.
  4. Select the invoice payment.
  5. Once the deposit is downloaded in the Banking page, system will match it to the deposit you've created in step 4.
  6. You click on the Match button to reconcile it. 

You can correct the reconciled bank account by undoing the transactions. Please check out this article for more information: How To Unreconcile A Transaction or Undo A Reconciliation. Creating journal entries won't fix the undeposited transactions. You'll need to clear them first. 

 

You may also want to ask for more help from your accountant on how for a few pieces of advice. 

 

If you need anything else, please let us know. 

 

 

Community Contributor **

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Thanks for your reply Gary. I'm getting the feeling this may be more trouble than it's worth. I may just set up an external spreadsheet to get his through for now to track balances with. However, my only issue then would be that the invoices (which were already entered) would show as being outstanding for tax purposes. Would it make sense to do credit memo's for those to zero out accounts receivable? 

Community Contributor **

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

Sorry, just realized I called you Gary because I read your name too fast! :)

QuickBooks Team

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

It's great to hear from you again today, cornerstonemgmtg.

 

I'm by no means an accounting professional, but allow me to join this discussion and share some insight that can help get you on the right track to recording this.

 

I wouldn't recommend creating credit memos. While these could zero out Accounts Receivable (A/R), they would also increase your income which can cause a discrepancy on your books.  As was mentioned by my colleagues, MichelleT and GarlynGay, it would be better to link the deposits to your invoices.

 

The following steps will guide you through that process:

 

To find and edit the deposit

  1. From the left navigation menu, select Accounting.
  2. Find the account you deposited the payment to, then click View Register.
  3. Locate and select the correct deposit.
  4. Hit Edit.
  5. On Bank Deposit screen, scroll down to Add funds to this deposit.
  6. In the Account column, search and select Account's Receivable.
  7. Click Save and close.

To apply the deposit (payment) to your invoice

  1. From the left navigation menu, select Sales.
  2. Go to the Customers tab.
  3. Select the customer's name.
  4. Find the invoice, then click Receive payment.
  5. Make sure both the Invoice and Deposit are selected.
  6. Click Save and close.

I'm also including an article for more information about this process: How to link a deposit to an invoice

 

This will let you apply the payments (deposits) to the correct invoice showing as outstanding. In addition, this will also ensure that the affected accounts (bank, income, and A/R) are balanced.

 

However, since you've mentioned that these transactions were already reconciled, you may wish to seek additional guidance from an accounting professional. Every business is unique and they can make suggestions on how to handle this. Our Intuit Find-A-ProAdvisor site can help you to find certified professionals in your area.

 

Don't hesitate to reach out to me here in the Community with any additional questions or concerns you may have. Thanks for dropping in, wishing you and your business only the best.

Frequent Explorer *

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

@MichelleT applying deposits to invoices in this manner creates a duplicate deposit in the bank ledger. 

QuickBooks Team

Re: Payment received, deposited to bank account but not applied to invoice - how to correct after...

I know how to correct the duplicate deposit, Sajid_Rahim.

 

This can happen when the deposit is added in the Banking page instead of matching it to the open invoice. You can undo the added deposit to remove the duplicate entry, and then match it to the invoice.

 

Here's how to undo and match the deposit:

  1. Click Banking on the left panel.
  2. Go to the Reviewed tab.
  3. Find the deposit that was added.
  4. Under the Action column, click the Undo link.
  5. Go back to For Review.
  6. Under the Action column, click the Match link. If you don't see this option, click the transaction and select the Find match radio button.
  7. On the list of the suggested matches, find the open invoice and match the deposit there.
  8. Click Save.

Keep in touch if there's anything else you need. I'll be around to help you further.