Excess payment received - to adjust against next invoice

Derek Atkins derek at ihtfp.com
Sat Sep 1 12:22:32 EDT 2012


Hi,

On Sat, September 1, 2012 10:35 am, Vikas Damodar Garud wrote:
> Hi,
>
> I provide consulting assistance on behalf of one institute.  This is my
> customer.  I raise invoices on the Institute, which are paid by the
> Institute.
>
> Recently, the Institute made an excess payment - by oversight - for one of
> the
> invoices.  It was noticed immediately after the online payment was
> confirmed.
> We agreed to treat the extra payment as advance for the subsequent
> invoice.  I
> did it in following way (Figures for example)
>
> Invoice No. 1:  Invoice amount:  100
> Invoice posted as:
> Work done (Income: Fees received):  100

This looks fine.

> Payment computation by Institute:
> Invoice amount for the work:  100
> Tax Deducted at source (TDS):  10 (Credited to my account with income tax)
> Excess payment:  15
> On-line payment in bank account:  105
>
> Process payment in GnuCash by me:
> Bank deposit (Asset:Bank):  105
> TDS (Asset:TDS):  10
> Payment against invoice (Asset: Account Receivable):  -100
> Excess payment for advance against next invoice (Income: Fees received):
> -15

This looks weird, let alone wrong.  You don't say how you create this
transaction, but the result is wrong.  The key here is that you just
Process Payment for the total amount received.  So you should Process
Payment for $115, which would credit A/R for $115.  Then you can split the
debits into TDS and Bank.

GnuCash will then keep track of the over-payment (or pre-payment) in your
A/R account and then when you invoice the next invoice it will use that
towards the invoice.

> Invoice No. 2:  Invoice amount:  85 (100 - 15)
> Invoice posted as:
> Work done (Income: Fees received):  100  (It happened to be for same
> amount)
> Advance (Income: Fees received):  -15

Don't do this yourself.  Just invoice for your $100 as you normally would.
 You print it out "with payments" to show that it's been partially paid. 
Or you can print a Customer Report to show they only owe $85.

> Payment computed by institute
> Invoice amount for the work:  100
> Tax Deducted at source (TDS):  10 (Credited to my account with income tax)
> Advance paid with previous invoice:  15
> On-line payment in bank account:  75
>
> Process payment in GnuCash by me:
> Bank deposit (Asset:Bank):  75
> TDS (Asset:TDS):  10
> Payment against invoice (Asset: Account Receivable):  -100
> Advance payment with previous invoice (Income: Fees received):  15

Again, just Process Payment for what they actually paid you.  Don't worry
about the Advance Payment like this.

> In receivable ageing report, I see 15 as overdue, which is not correct.
> Institute has made all the payments.
>
> My very limited knowledge of accounting does not help me in finding out
> the
> mistake.
>
> What is the mistake?  How should I handle this?

The mistake was manually splitting the advance payment instead of allowing
GnuCash to maintain it for you.  I.e.,:

Invoice: $100
Payment: $115
Invoice: $100
Payment: $85

> Thanks
> Vikas Garud

> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.

-derek
-- 
       Derek Atkins                 617-623-3745
       derek at ihtfp.com             www.ihtfp.com
       Computer and Internet Security Consultant



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