3/1/2023 0 Comments Due to due from journal entryOn the receipt or payment entry screen post one line item to Accounts payable, the other business’ name as a supplier, and the relevant purchase invoice reference number. If the amount you owe the other business on the purchase invoice(s) is larger, to to the Payments tab and click New Payment (dashed arrow): If the amount owed to you for the sales invoice(s) is larger than the amount you owe on the purchase invoice(s), go to the Receipts tab and click New Receipt (solid arrow). To use this approach, determine whether the balance due on the sales invoice(s) or purchase invoice(s) is larger. This raises the possibility of confusion and means that your records will be incorrect until the other business takes corresponding action. Otherwise, you will have offset the invoices while the other business will not. This method can only be accomplished if the other business agrees to make or receive payment at the same time. It has the disadvantage of requiring slightly different entries depending on whether the sales or purchase invoice is larger. It also accomplishes the process with a single transaction. This approach has the advantage of providing a legal transaction record to furnish the other business. If settlement of both the sales and purchase invoices involved is imminent, you can resolve the situation with a single receipt or payment form. Another disadvantage is that a separate transaction is still required to settle one of the invoices (if it was not completely offset). You run the risk of misunderstanding, exchange of remittances based on the initial documents, and the need for potential refunds. You must rely upon mutual agreement that the other business will make a corresponding adjustment in some way. You have no suitable transaction to send to the other business to document the effort. A disadvantage is that a journal entry is only an internal record. The balance due on the sales invoice will decrease by 200:Īn advantage of this method is offsetting of obligations with a single transaction. Credit Accounts receivable for the customer and the sales invoice by the same amount.Īfter making the journal entry illustrated above, your purchase invoice will be marked as paid in full, even though your payment was actually via journal entry: Otherwise, leave the Invoice field blank. If the purchase invoice has a reference number, it can be selected. In your journal entry, debit Accounts payable for the supplier by the smaller of the sales or purchase invoice balances. ![]() To make an offsetting contra entry, go to the Journal Entries tab and click New Journal Entry: It makes no difference whether the sales or purchase invoice is larger the procedure is identical. They all have their own advantages and disadvantages. The approaches produce slightly different financial results, because some only offset obligations, while one also records movement of money. (Of course, if the purchase invoice is larger, you would be decreasing the amount owed from the purchase invoice by the amount of the sales invoice.) There are three methods you could use: Instead of receiving money from the other business for your sales invoice while paying for the purchase invoice, you can offset the outstanding sales and purchase invoices, decreasing the amount due from your sales invoice by the amount of the purchase invoice. The purchase invoice shows in the Purchase Invoices tab: ![]() You have a customer who owes you 1,000 from a sales invoice, as shown in the Sales Invoices tab:Īt the same time you have made a purchase on credit for 200 from this same business (in its role as a supplier).
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