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Write off a specific vendor's negative A/P

Forum|Forum|2 years ago
October 5, 2023
1 reply
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Hello. There is negative A/P balance after a negotiated settlement between our company and a vendor. How do you write off a specific vendor's (e.g, consulting firm) negative A/P? It is there due to the vendor giving a credit to our company. We will not be using the vendor any more. I wish I could just do a J/E for the below:

Debit

Consulting account A/P

Credit

Consulting expense

But the J/E does not allow me to specify the specific vendor's A/P account. What am I missing?

Thanks in advance!

QuickBooks Online

Best answer by Rainflurry

Think could do the following J/E for it. Your thoughts? Trying to learn and appreciate all the help!

Debit

Accounting/Consulting expense

Credit

Account's A/P

@g_Quik_Online

Got it. Happy to help as much as I can. Did you receive a settlement and after that there is still a negative balance in A/P? If so, then entering a bill and assigning your Consulting/accounting expense account to it is the correct way to zero out A/P. That is the same as a JE that debits Consulting/accounting expense and credits A/P, just as you suggested. You can then clear the negative A/P balance by applying the credit memo to the bill.

AlcaeusF

Level 14

Hi, g_Quik_Online.

I'm here to help you write off your vendor's negative balance in QuickBooks Online (QBO).

You're making great progress! When creating a Journal Entry (JE) to write off a vendor's negative balance (credit), simply debit the bank account and credit the default Accounts Payable (A/P) account instead. It is not necessary to select a specific vendor's A/P account for this transaction.

Once done, all you need to do is link the JE to the vendor credit by using the Pay Bills option. Here's how:

Go to the + New icon.
Select Pay bills.
Place a checkmark beside the vendor's name in question.
The total payment amount should now be zero.
Hit Save and close to complete.

The other option is to create a bank deposit for the vendor using the same default A/P account. Here's how:

Go to the + New icon.
Select Bank Deposit.
In the Add funds to this deposit, select the vendor's name in the Received From dropdown.
Choose the default A/P in the Account dropdown.
Enter the amount.
Hit Save and close.

After that, link the deposit to the credit. You can do the same steps above to link the transactions.

You can check out this article for further guidance: Write off customer and vendor balances. Though this article is for QuickBooks Desktop, the steps can be used in QBO.

Moreover, I strongly recommend seeking assistance from your accountant. They will be able to provide expert guidance and determine the best course of action for you and your business.

You can also run a vendor report to check all the payments made to vendors. Refer to this article for future reference: Run a report with vendor totals.

Please let me know if you have additional questions about this or anything else. I'll be more than willing to assist. Stay safe.

G

g_Quik_OnlineAuthor

Am confused. Your response says to "When creating a Journal Entry (JE) to write off a vendor's negative balance (credit), simply debit the bank account and credit the default Accounts Payable (A/P) account instead. "

There is no bank account, or cash, event happening. I do not want to debit the bank account and then have a reconciliation nightmare as this is a non-cash event. Could you please reword your solution and/or provide a different one where I am not debiting the bank account?

L

LeizylM

QuickBooks Team

I know a way to write off a specific vendor's negative Accounts Payable in QuickBooks Online (QBO), g_Quik_Online. I'll guide you through the steps to ensure a smooth experience.

We can use a Wash account when creating vendor credits in QuickBooks Online. This way, the amount won’t reflect in your Accounts Payable account.

Here's how:

From the left navigation pane, select the Accounting menu and click Chart of Accounts.
On the Chart of Accounts tab, click the New button.
Choose a Bank for the Account Type. You can choose any detail type you want for your clearing account.
Type in the Name for the clearing account.
Click Save and Close.

Next, let's create a Journal Entry (JE) to transfer Receivable to Wash Account:

In your QBO account, click on +New, then select Journal entry.
Select the Wash Account on the first line, then enter the amount in the Debit column.
Select Accounts Receivable on the second line, then put the amount in the Credit column.
In the Name column, select your customer.
Once ready, click on Save and close.

Furthermore, after you place the amounts into the right accounts, you can then reconcile your account to ensure that every record is correct: Reconcile an account in QuickBooks Online.

Feel free to get back here in the Community if you have further questions about the process. I'll be happy to help. Keep safe!

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