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DwhoaTreas
Level 3

How do I move a refunded fee into appropriate month, in accrual accounting?

I'm new to accrual accounting and don't know how to handle this case.

In December 2021 the bank overcharged my HOA for monthly fees. They charged $65, but it should have been $50. They refunded $50 in January 2022. How do I show that the net bank fee paid in December was $15? Is there a correct way to make a "matching" entry so that the year-end reports don't show us paying $65 in December, since it was refunded in January?

The vendor info for the bank shows a check for $65 in Dec. and a deposit of $50 in Jan.

Thanks!

3 Comments 3
Adrian_A
Moderator

How do I move a refunded fee into appropriate month, in accrual accounting?

Good day, DwhoaTreas.

 

You can create a Journal Entry to record the payment with the refund. Just a heads up, I'd still recommend reaching out to your accountant so they can guide you on what accounts are best to use.

 

Here's how to create a Journal Entry:

 

  1. From the + New button, select Journal entry.
  2. On the first line, select an account from the Account field. Depending on if you need to debit or credit the account, enter the amount in the correct column.
  3. On the next line, select the other account you're moving money to or from.
  4. Your Debit and Credit amount should match.
  5. Click Save and close.

 

When you're ready to reconcile the account, you can check this reference: Reconcile an account. This helps to make sure they match your bank and credit card statements. 

 

There you have it, DwhoaTreas. I'm just around if ever you need help in reconciling the accounts. Keep safe!

DwhoaTreas
Level 3

How do I move a refunded fee into appropriate month, in accrual accounting?

Thanks. I'm not sure how a journal entry solves the problem. If the bank fees charged in Dec. and refunded in Jan. are in a virtual account called Banking, are you suggesting that I should add an Other Asset or Other Liability type of account to pair with Banking and use that to match the refund to the charge? Should I make a journal entry to an Other --?-- account (Prepaid Expenses?) to sort of move the money from the Banking account forward in time by a month, and have another journal entry in the next month to put the money back into Banking?

 

DwhoaTreas
Level 3

How do I move a refunded fee into appropriate month, in accrual accounting?

I haven't heard back from the QB team, but this seems to work.

 

1.  Create a virtual account Prepaid Banking Fees, type Other Current Asset (subaccount of Prepaid Expenses).

2.  Create a Journal Entry to debit $50 from Prepaid Banking Fees and credit it to Banking with a December date.  Now the virtual prepaid account is down $50 for December, but the real Banking account has the correct amount.

3.  Create another Journal Entry dated January to do the opposite - debit Banking and credit Prepaid Banking Fees.  That puts back the money "borrowed" from the virtual Prepaid Fees account, and the January date matches the date that the bank actually refunded the overcharged $50 fee.

 

This sounds like what the QB team suggested, only with a bit more explanation.  If anyone out there with accounting training thinks this is correct or incorrect, please comment.  It feel right.

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