How do I apply a settlement to an old invoice and also where do the excess attorney fees go?

Hi emdee-constructi,

You can record the payment as a deposit first, so you can and break down the amounts to A/R and to the account used for the attorney's fee. By using A/R, that amount becomes a credit to the customer and can be applied as payment to their invoice.

I just want to clarify, the invoice is 130k and the attorney's fee is 20k, right? So, I assume you meant 50k? But anyway, you can still change the amount when you do the breakdown.

Apply credits to an invoice:

1. Open the invoice you want to apply the credit to and click Receive payment.
2. In the Receive Payment window, enter the Payment date, Payment method, Reference no. (if necessary) and the Deposit to account.
3. In the Outstanding Transactions section, make sure only that invoice is selected.
4. In the Credits section, select the deposit you created.
5. Click Save and close.

Let me know if you have other questions about your transactions. Take care!

Thanks for your quick reply! To clarify:

The invoice balance to customer is 130,000. 

Settlement is 145,000 INCLUDING the 20,000 that the customer agreed to pay OUR lawyer during negotiations. Our lawyer will get a check for 145,000, then take his cut of 20,000,  and will give us a check for 125,000.

Do I just apply the 125,000 and record a 5,000 loss (bad debt) on the invoice? 

I just am not sure if the 20,000 that the lawyer gets directly from the customer (and we never take in) gets put anywhere in MY books as $ received and gets paid as legal fees from us.

Thanks for your quick reply! To clarify:

The invoice balance to customer is 130,000. 

Settlement is 145,000 INCLUDING the 20,000 that the customer agreed to pay OUR lawyer during negotiations. Our lawyer will get a check for 145,000, then take his cut of 20,000,  and will give us a check for 125,000.

Do I just apply the 125,000 and record a 5,000 loss (bad debt) on the invoice? 

I just am not sure if the 20,000 that the lawyer gets directly from the customer (and we never take in) gets put anywhere in MY books as $ received and gets paid as legal fees from us.

Thanks for following up with the Community, emdee-constructi. I appreciate your additional details.

To properly identify how you'll need to enter each amount in your books, I'd recommend working with an accounting professional. If you're in need of one, there's an awesome tool on our website called Find an Accountant. All ProAdvisors listed there are QuickBooks-certified and able to provide helpful insights for driving your business's success.

Here's how it works:

1. Go to our Find an Accountant page.
2. In the Find an expert in section, choose what you're looking for, then use your search field to enter a City or ZIP code.
   
3. Select Search.
   
4. Browse through the results and find one that works best for your business. You can click on each ProAdvisor's profile to learn more information about them.
   

Once you've found an accountant, they can be contacted through their Send a message form:

1. Use the available text box to introduce yourself. Be sure to include details about which services you're looking for.
   
2. Enter your appropriate info in the Your name, Your email, and Your phone number (optional) fields.
   
3. Hit Send message.
   

You'll also be able to find many detailed resources about using QuickBooks in our help article archives.

Please feel welcome to send a reply if there's any questions. Have a wonderful day!

 "...record a 5,000 loss (bad debt) on the invoice?"

Yes. Either bad debt or reverse the revenue account (create credit memo for $5K) if you're on a cash basis

Hope this helps!.