This covers the situation when you partly pay an accounts payable invoice and you want to apply a credit note against the balance.
There are a few options:
- You may either
- Delete the payment and re-enter the original invoice, or
- Edit the amount payable on the original invoice.
The changes to the invoices are tracked in the audit history.
- Issue a credit note and include the credit note when entering the payment details.
You may issue a credit note, as follows:
The credit note is assigned to the Supplier (not to the original invoice)
So this will appear as a negative amount owing on the Accounts Payable register (and both the invoice and the credit note appear as unpaid).
You may either allocate the credit as part of a future receipt to offset the invoice (select both the invoice and the credit) or you many enter a journal entry to mark the invoice and credit note as ‘paid’.
How to code the credit note:
The credit note serves to reverse the original coding of the accounts payable entry.
If the original accounts payable entry was:
DR Legal Fees 100 Tax 10 Alloc: Asset A
DR Legal Fees 50 Tax 5 Alloc: Asset B
DR Management Fees 200 Tax 20 Alloc: Asset A
CR Accounts Payable (565)An the amount of the reversal is say $66 relating to legal fees on asset B, the credit note is
DR Accounts Payable 66
CR Legal Fees 60 Tax 6 Alloc: Asset A
In this instance, there is no relationship between the original invoice and the credit note, per se. The credit note is journalled as a reversal of the original accounting entry.
The journal entry of the payment entry (taking into account the credit note) will be as follows
DR Accounts Payable (allocate to original invoice)
CR Accounts Payable (allocate to credit note)
The Accounts Payable account will be the original account used on the AP and CN entries.
If a short payment is made on the original invoice without “taking up” the credit note (leaving an outstanding balance on an accounts payable invoice), you can process a zero payment and take up the remaining balance of the invoice and off set it against a credit note to “clear out” the supplier’s accounts payable ledger.