Negative Accounts Receivable

Thank you, John. Learning something new everyday. 

Stay well. 

Thank you!  Didn’t understand that before.  I’ll leave it as is. 

Stay well. 

We owe a negative accounts receivable from and over payment to the client. How do we record the payable and get rid of the negative account receivable?

Good evening, @ Jhay. 

Thanks for joining this thread. 

Before going into detail, It's always best to check with your accountant to be sure this option would work for your business setup.

Below, are several articles, including information about Account Receivable accounts with how they work and more: 

• Accounts Receivable workflows in QuickBooks Desktop
• How do I clear out the negative amount on the A/R Aging report?
• Clearing old accounts receivable activity

Let me know if the information above does the trick. If you have any more questions, please don't hesitate to reach back out. Have a good one!

I couldn't find the answer in your links above, but maybe I need to clarify. We received two payments from a client for the same invoice. One payment was applied to the invoice. The other payment was credited to the account and shows a negative A/R. We owe that second payment to the client since they already paid the intended invoice. How do I get rid of the negative A/R and record the payable to the client?

I'd like to share some steps to clear up the overpayment, Jhay.

If you choose the refund the customer, then you can follow these steps:

1. Go to Customers > Customer Center.
2. Select the customer's name, and double-click the Payment.
3. Under the OVERPAYMENT section, choose REFUND THE AMOUNT TO THE CUSTOMER.
4. Click Save and Close, and select Yes when prompted to record the transaction.
5. In the Issue a Refund window, hit the OK button and this will automatically create a check.

The process will offset the customer balance. Otherwise, check out this article for the other steps: Give your customer a credit or refund in QuickBooks Desktop for Windows.

If you have any additional questions, please let me know. We are always around to help you some more. Thanks.

This is pretty straight forward ...

If you have already made a payment back to the Customer ...
- Open the Payment and change the GL Account to your A/R Account
- Add the Customer/Job on the Line
This will zero out the negative A/R ... but you may need to g into the Open Invoice Report and apply the payment to the original Invoice ...

If you haven't made payment back to the Customer ... go to the Customer Payment that caused the overpayment and select the refund Customer option at the bottom left and follow the prompts ...

If you are keeping the xtra money ...
Write a Zero Dollar Check with the A/R line and Customer/Job on the first Distribution Line and
the Other Income (Misc Income) for the second line ...

I work in an industry that gets pre-payments almost all the time before the jobs are completed ...
This of course creates a negative A/R hence messing up the true A/R reports.

We do a monthly temporary transfer to our Current Liability Account - Customer Deposits with a Memorized Journal Entry dated the last day of the month ... this corrects the A/R Reports and Open Invoice Reports once you apply the Je to the Payments.
We then do a reversal of the Je dated the first day of the following month. This puts the payment back to be applied if the job gets done that nect month.

The following month we do the same process, but if the items listed on the AOpen Invoice Report is the Reversed JE, we just change the date to the beginning of the following month since apparently the job was not completed.

If the negative A/R is an overpayment that is not being refunded, we use a memorized zero dollar check to take the overpayment to Other Misc Income. Of course you have to apply the payment in the Open Invoice Report.

If the negative balance is being refunded ... either use the refund process listed at the bottom left of the Payment causing the overpayment, or just distribute the check to the A/R Account with the Customer/Job listed in the column.

Hello,

Thanks for joining the thread, @AnneB8. I'll share some details about how to clean up the negative balances in your AR balance and fix the negative AP balance in QuickBooks Desktop (QBDT).

To clean up a negative balance in your AR account, you can set up a clearing account/wash account to move the balances to a different account. I'll gladly input the steps below. Here's how:

1. From the Lists menu, select Chart of Accounts.
2. Right click anywhere in the Chart of Accounts, then select New.
3. In the Add New Account window, select the Bank radio button.
4. A reminder, while you can choose from several types of accounts, the best is a bank account because of the following reasons:

• You can pay into a bank account via Receive Payments or Make Deposits.
• You can pay out of a bank account via Write Checks or Pay Bills.
• A bank account appears on the balance sheet and on the statement of cash flows to balances and changes in balances.
• To allocate expenses to overhead or class using a zero check, you must use a bank account as your Clearing account.

      5. Select Continue.

      6. In the Account Name field, enter Clearing Account, Barter Account or Wash Account.

      7. Do NOT enter an opening balance.

      8. Select Save & Close.

Feel free to read this article for more information: Set up a clearing account.

I'd also recommend checking this helpful article to learn how you can clean up the negative balance in your Accounts Payable: Resolve AR and AP balances on the cash basis Balance Sheet.

In addition, I've got you this article to know more about how to properly handle customer's credits in QBDT: Give your customer a credit or refund in QuickBooks Desktop for Windows.

Also, feel free to visit this article about how to deal with customer transactions in QuickBooks: Get started with customer transaction workflows in QuickBooks Desktop.

@AnneB8, I'll be here in the Community space if you need further assistance clearing AR and AP negative balances in QuickBooks. Take care, and have a nice day!