Posting Adjustments and Corrections

An important feature of the Accounts Receivable Posting window is the capability to make adjustments and corrections.

 

Making Changes:

Through this window, you can adjust the following figures for an invoice:

You change charges and payments using adjusting entries to correct the balance. For example, if the charge amount for an invoice is $10.00 too high, you make an adjusting entry and specify a $10.00 payment, thus offsetting the excess charge amount and correcting the balance. You can make changes to purchase order numbers, dates, and discounts directly, without creating adjusting entries.

 

Understanding Control and Reverse Numbers for A/R:

When you make adjustments, it's very important that you use the correct general ledger accounts. The system uses standard double-entry accounting. This means that to make a change, you need to debit or credit one account, and then make an entry for the same amount in an offsetting account.

 

For example, when you post payments, the A/R control account is credited, and the cash in bank account is debited. The cash in bank account is the offsetting account for this transaction. (The offsetting account is also called the reverse account.)

 

Conversely, when you post an invoice, the A/R control account is debited, and the sales account is credited.

 

When you make adjustments in A/R, you should always specify the A/R control account as the control account for your transaction.

Note:  The A/R control account number is specified in the A/R CONTROL field in the (L2) G/L Master Numbers screen.

However, the account you specify as the reverse account varies, depending on the transaction. Each A/R type code has a default reverse account, which is the appropriate one to choose for the corresponding transaction. The default reverse accounts for each A/R type code are shown below:

 

A/R Type      Default Reverse Account

Invoices             Sales Control Account

Credits              Sales Control Account

Payments          Cash in Bank Account

Adjustments      Sales Control Account

 

Suppose you’re making an adjustment because a payment was made to the wrong account. In this case, you would specify the cash in bank account as the reverse account, since that was the reverse account for the original payment (the posting you’re trying to correct).

 

On the other hand, if you were making an adjustment to write off a bad debt, you would specify the account for bad debt as the reverse account.

Note:  If you are not live on general ledger, you do not need to worry about which reverse account to use. Simply accept the default reverse account for each transaction.