How to enter distribution properly to ensure the correct accounts are credited when a payment deposit is submitted
When creating an invoice it is very important to list any initial fee line items first if you want the initial payments to be credited to the correct distribution accounts.
Receiving Payments is a two-step process: Receive Payments and Submit Payment for Deposit
Step 1: Receive Payments
- Enter the payment amount
- When clicking Auto Apply, the software applies the payment to the oldest customer invoice first.
- If you would prefer to select the invoice against which to apply the payment, mark the box to the right of the Balance.
Step 2: Submit Payment for Deposit
When you check the box to the left of the Accounts Receivable Payment, the deposit transaction is created in the General Ledger which debits Cash and credits the Income Accounts listed in the Invoice starting with the first invoice line item until it is fully paid, then moving to the next one.
What to do when payment is not applied to the correct line item
Once payment is applied to an invoice with the initial fees listed last on the invoice distribution, the only way to update the General Ledger to correct this is through a journal entry. However, if you do this after the initial payment is made, to correct this (to Debit the first distribution item and Credit the last), you must remember to also journal the final invoice payment reversing this initial entry. This is because the final payment will still use the invoice distribution to determine which accounts to credit.
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