Excess payment received - to adjust against next invoice

[Vikas Damodar Garud]

On Saturday 01 Sep 2012 9:52:32 PM Derek Atkins wrote:

Thanks Derek,  that was real quick response.

I think I have found my mistake.  Please see in-line

> 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.

I processed payment for 115.  But posted only 100 to A/R and 15 (the excess 
payment) to Income:fees received account.  Not having any accounting 
knowledge, the 15 seemed to be from income, to be received.  Hence credited 15 
to income account.  That was first mistake.

> 
> 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.

This was second mistake, follow-up from the first.  Since 15 were to be shown 
as advance received, I "took" it from income:fees account, where it was 
previously credited. 

> 
> > 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.

Third mistake, following from second.  Since invoice was made for 85 
(payable), that amount was processed.  The amount of 100 for work done was 
balanced with invoice value and advance.

A series of mistakes!

> 
> > 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.,:

Fortunately, the books are not closed and accounts are yet to be reconciled.  
I think I will edit the process payment transactions and unpost the second 
invoice and make it for 100 and re-post it.  That should balance the ageing to 
zero.

Thanks again,
Vikas Garud