Applying a payment or credit from one customer to another in QuickBooks typically involves a two-part process: first, transferring the credit balance between their Accounts Receivable accounts using a Journal Entry, and then applying that transferred credit to the receiving customer's outstanding invoices. This method ensures accurate tracking of funds and balances within your accounting system.
Here's a detailed breakdown of the steps:
Step 1: Identify the Credit
Ensure the credit you wish to transfer is already recorded under the originating customer's account. This could be an overpayment or an existing credit memo. Confirm the exact amount available for transfer.
Step 2: Create a Journal Entry to Transfer the Balance
This crucial step moves the financial obligation from the originating customer's account to the recipient customer's account.
- Navigate to Create Journal Entry: In QuickBooks, access the option to create a new transaction and select "Journal Entry."
- Set the Date: Choose the date you want the transfer to take effect.
- Record the Debit and Credit:
- Debit Accounts Receivable (Originating Customer): Enter the amount of the credit you are transferring. Ensure this line is linked to the originating customer's name. This action reduces the Accounts Receivable balance for the customer who initially provided the payment or credit.
- Credit Accounts Receivable (Recipient Customer): Enter the same amount. Ensure this line is linked to the recipient customer's name. This action creates an equivalent credit balance under the recipient customer's Accounts Receivable, making it available to apply to their invoices.
- Add a Memo: Include a clear memo explaining the reason for the transfer (e.g., "Transfer of credit from [Originating Customer Name] to [Recipient Customer Name]").
- Save the Journal Entry.
Step 3: Apply the Originating Customer's Credit to the Journal Entry
After creating the journal entry, you need to apply the original credit or overpayment from the originating customer to the debit portion of the journal entry you just created. This effectively "clears out" the credit from the originating customer's account.
To apply the credit from the originating customer to the journal entry that facilitated the transfer, follow these steps:
- Select + New.
- Under Customers, choose Receive Payment.
- Select the name of the customer the credit was transferred from.
- Under Outstanding transactions, check the journal entry you created.
- Under Credits, check the credit memo you need to transfer.
- Select Save and close.
Step 4: Apply the Transferred Credit to the New Customer's Invoice
Now that the credit has been moved and is associated with the recipient customer, you can apply it to their outstanding invoices.
- Navigate to Receive Payment: Similar to Step 3, initiate a new transaction and select "Receive Payment."
- Select the Recipient Customer: Choose the name of the customer who received the transferred credit.
- Apply the Credit: The credit balance created by the journal entry (from Step 2) should now appear as an available credit for this customer.
- Under the "Credits" section, ensure the newly available credit is checked.
- Under "Outstanding Transactions" or "Invoices," check the invoice(s) you wish to apply this credit against.
- Review and Save: Verify that the payment amount equals the credit applied and that the outstanding balance of the invoice is reduced correctly.
- Select Save and close.
Important Considerations
- Accuracy: Always double-check all amounts and customer names to prevent errors in your financial records.
- Reconciliation: Ensure your Accounts Receivable accounts reconcile properly after the transfer to maintain accurate financial statements.
- Consult a Professional: If you are uncertain about any step, particularly when creating and applying journal entries, it is advisable to consult a professional bookkeeper or accountant.
