Incorrect customer payment

Dixon FDS · ‎August 14, 2023

Our Customer A sent us a check of $100 to pay for our invoice#A123 of $30 and another invoice of $70 which belongs to our sister company. We deposited the check of $100, applied $30 to invoice #A123 and transferred $70 back to our sister company. How to record the receipt of $70 on behalf of our sister company and subsequent transfer of $70? Thanks.

LieraMarie_A · ‎August 14, 2023

Thank you for providing additional clarification, @Dixon FDS.

You can use these steps to track these transactions accurately within your own company's books. Be sure to consult your accountant to ensure the appropriate accounts are used in your specific setup.

Step 1: Record the Check Deposit of $100

From the left-hand navigation menu, click on + New and then select Bank Deposit.
Within the Bank Deposit window:
- Choose the appropriate bank account where the check was deposited.
- Under Add funds to this deposit, input the following:
  - In the first line, choose the customer's name and the Accounts Receivable account. Enter $30.
  - In the second line, select the relevant liability account (e.g., "Due to Sister Company") with $70. You might need to create the Canadian Company as a vendor.
Click Save and close.

Step 2: Record the Settlement of Invoice#ABC ($30)

From the left-hand navigation menu, click on + New and then select Receive Payment.
Select the appropriate customer.
Choose the bank account where the payment was deposited.
Pick Invoice#ABC.
Under the Credits section, link the payment with the corresponding deposit by selecting it.
Click Save and close.

Step 3: Record the Transfer of $70 Due to Sister Company

Given that this transfer is done physically and outside QuickBooks Online, you can create a journal entry.

Select + New from the left-hand navigation menu, then Journal Entry.
In the Journal Entry window:
- Choose the appropriate date.
- Debit the relevant liability account (e.g., "Due to Sister Company") with $70.
- Credit the bank account from which the $70 was withdrawn.
- Add explanatory notes or a memo.
Click Save and close.

Step 4: Use Pay Bills to connect the bank deposit to the vendor credit

Click + New.
Select Pay bills.
Select the bank deposit you created. You’ll see the amount of the credit in the Credit Applied field. The total payment should be US $0.00.
Select Save and close.

Additionally, it's important to regularly reconcile your bank accounts to maintain accurate financial records, detecting errors and discrepancies.

Feel free to reach out if you have any further questions or need additional guidance. Your financial accuracy is vital, and we're here to support you every step of the way.

View solution in original post

QueenC · ‎August 14, 2023

Hi there, Dixon. Thank you for reaching out to us with your question with regard to handling the payment made by your customer for both your invoice and your sister company's invoice. I understand that navigating QuickBooks Online can be challenging, especially when faced with unique situations like this. Rest assured, I'm here to assist you in recording this transaction accurately, ensuring that your books remain organized and error-free.

In QuickBooks Online, we have two ways to record the transfer you made to your sister company. An easier way is to record the transfer between companies as we'll be treating this as an expense or check from your company and deposited to your sister company.

I'd be glad to show you how:

Click on the + New icon then select Check or Expense.
Select the bank account where the funds are coming from.
Enter the Payee, Payment Date, and other necessary fields.
In the Category details, choose either an Asset or an Equity account to reflect the funds going out of the business. It's always a good idea to consult with your accountant for guidance on which account to use from an accounting perspective.
In the Amount column, enter the amount to be transferred ($70).
When done, hit Save and close.

Another way is to transfer funds between accounts which you can get guidance for the whole process in this article: Transfer funds between accounts in QuickBooks Online. Since we will be recording the transfer between two accounts, note that you'll need to create a bank account that'll represent your sister company.

Moreover, here's an article you can utilize in case you'd need to void or refund customer payments so your accounting stays accurate: Void or refund customer payments in QuickBooks Online.

If you have any further questions or require additional assistance in recording transfers, please don't hesitate to reach out to us by leaving a comment below. We are committed to providing you with the support you need as you continue to familiarize yourself with QuickBooks Online. Wishing you success in your financial endeavors!

Dixon FDS · ‎August 14, 2023

Hi Quennie,

Thanks for your swift reply. Sorry I have not made it clear in my initial question. Unfortunately, our sister company is a Canadian Company which is not under QBO. Hence, I have no choice but to transfer $70 physically to the sister company to clear this balance.

I am not sure how to record (i) the check deposit of $100; (ii) settlement of our Invoice#ABC of $30 and (iii) $70 due to our sister company.

Thank you for your help.

LieraMarie_A · ‎August 14, 2023

Thank you for providing additional clarification, @Dixon FDS.

You can use these steps to track these transactions accurately within your own company's books. Be sure to consult your accountant to ensure the appropriate accounts are used in your specific setup.

Step 1: Record the Check Deposit of $100

From the left-hand navigation menu, click on + New and then select Bank Deposit.
Within the Bank Deposit window:
- Choose the appropriate bank account where the check was deposited.
- Under Add funds to this deposit, input the following:
  - In the first line, choose the customer's name and the Accounts Receivable account. Enter $30.
  - In the second line, select the relevant liability account (e.g., "Due to Sister Company") with $70. You might need to create the Canadian Company as a vendor.
Click Save and close.

Step 2: Record the Settlement of Invoice#ABC ($30)

From the left-hand navigation menu, click on + New and then select Receive Payment.
Select the appropriate customer.
Choose the bank account where the payment was deposited.
Pick Invoice#ABC.
Under the Credits section, link the payment with the corresponding deposit by selecting it.
Click Save and close.

Step 3: Record the Transfer of $70 Due to Sister Company

Given that this transfer is done physically and outside QuickBooks Online, you can create a journal entry.

Select + New from the left-hand navigation menu, then Journal Entry.
In the Journal Entry window:
- Choose the appropriate date.
- Debit the relevant liability account (e.g., "Due to Sister Company") with $70.
- Credit the bank account from which the $70 was withdrawn.
- Add explanatory notes or a memo.
Click Save and close.

Step 4: Use Pay Bills to connect the bank deposit to the vendor credit

Click + New.
Select Pay bills.
Select the bank deposit you created. You’ll see the amount of the credit in the Credit Applied field. The total payment should be US $0.00.
Select Save and close.

Additionally, it's important to regularly reconcile your bank accounts to maintain accurate financial records, detecting errors and discrepancies.

Feel free to reach out if you have any further questions or need additional guidance. Your financial accuracy is vital, and we're here to support you every step of the way.

Dixon FDS · ‎August 15, 2023

Thank you for your professional advice.

For the Step 3 & Step 4, Could we just use "Transfer" in the Bank Feed to transfer the payment of $70 to the current liability account "Due to Sister Company" instead of using Journal Entry?

Thanks.

Mich_S · ‎August 15, 2023

You're most welcome, Dixon. I want to add clarifications for you to keep track of customer payments in QuickBooks Online properly.

Creating the journal entry is a way to record the transfer made to your sister company. Therefore, no need for you to use the Transfer option on your Bank Feed to move the $70 to the current liability account.

The purpose of using a journal entry is to accurately track and decrease the liabilities of the business.

I'll also attach here some helpful modules about running sales reports and personalizing your invoices:

You can always get back to us if you have other questions about handling payments. We'll make sure to respond as soon as we can. Have a wonderful day!

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