For Consultants/Accountants QuickBooks Tips/Tricks Working with QuickBooks

Trading Credits Between Jobs in QuickBooks

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Written by MB Raimondi

I occasionally get clients (particularly contractors) asking me if they can transfer the overpaid balance from one project to another, often from a completed project to a new project. They thought it would be easy. They thought they could create a journal entry and debit Accounts Receivable for the overpaid job and credit Accounts Receivable for the new job. Then they find out that you can’t have more than one Accounts Receivable or Accounts Payable line in a journal entry. Thus the phone call!

This is an excerpt from MB Raimondi’s QuickBooks Live Webinar  titled “Customer & Vendor Tricky QuickBooks Transactions” on April 30 2012.

Although you could use journal entries to accomplish the transfer, I tend to stay away from journal entries and try and use the built in sales transactions in QuickBooks.  QuickBooks is “forms” based.  I feel that it’s a good practice to use those forms when you can.  As accountant’s we are used to doing journal entries but our clients might not like how they show up on reports.  The accounts that I generally avoid using journal entries with are:  Accounts Receivable, Accounts Payable and bank accounts.

Let’s look at an example, where the new job is the Poolhouse,  which is already set up in QuickBooks. The Kitchen job has an overpayment of $680 that Doug Jacobsen wants transferred to the Poolhouse.

Project balances in the Customer List

Step 1: Clearing Account

Set up a Clearing (or Trading) Account on your Chart of Accounts as a Bank type of account.

Clearing account

Step 2:Write a Check

Write a check for the amount of the credit from the Clearing Account.

  • Use the job that has the credit as the Payee. In our case, it is the Kitchen job
  • The amount of the credit to be transferred is the amount of the check
  • Under the Expenses tab, use the Accounts Receivable account
  • Enter the job name again under the Customer:Job column
  • Click Save &Close

Check to the Clearing Account

This will decrease (credit) the Clearing Account and increase (debit) Accounts Receivable for the Kitchen Job .

Step 3: Apply the Credit

Apply the two postings to Accounts Receivable for the job that just gave up the credit (Kitchen).

  • Open the Receive Payment screen
  • Enter the name of the job that had the credit (Kitchen)
  • Highlight the open amount
  • Click on Discounts and Credits
  • Check the credit, if not already checked off
  • Click Done
  • Click Save & Close

Apply the Credit

Step 4: Receive a Payment

Receive a payment for the job that receives the credit.

  • Open the Receive Payment screen
  • Enter the job name that will receive the credit (Poolhouse)
  • Enter the amount of the credit received
  • Use a payment method (which you will need to set up) called Trade (optional – but it clarifies the transaction)
  • Click Save & Close

Customer Payment

Step 5: Deposit the Payment

Deposit the payment into the Clearing Account.

I am assuming that all payments are automatically being posted to Undeposited Funds. If that’s not the case, you can choose the Clearing Account directly from the Receive Payment screen.

  • Click on Record Deposits from the Home Page
  • Select just the payment for the trade

Deposit the Payment

  • Click Okay
  • Change the bank account to the Clearing Account

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  • Click Save & Close

The results are:

  • The Clearing Account balance is zero

Clearing Account

  • The credit is transferred and appears on the correct job.

Credit is transferred

BEST PRACTICES TIP: Use the Memo field on the transactions to describe the action. Memos will show up on reports and statements.

Customer Balance Detail Report

 

Customer Statement

In order for the memo to show up on the Statement for the “check” written, it must be entered on the Accounts Receivable line.

Memo for the Statement

There are other reasons that you may need to trade balances. For example, you may have a customer who is also a vendor. You buy from them; they buy from you; and you agree that one business will just pay the difference between the invoice and the bill. You need to record the full expense and the full income but you are not receiving the full amount and are not paying the full amount – so you need to figure out a way to reduce the payable and reduce the receivable without cash exchanging hands. The idea behind recording the transactions is similar to what we discussed here but the transactions are a little different. Another topic for another time!

The same holds true for bartering. If you barter with your customers or vendors, at least some part of the transaction does not involve cash, but you have to reduce the receivable or the payable.

Both of the above examples use a Clearing Account. Think about the Clearing Account as your Non-Cash Bank Account and then apply the principles talked about in this article.

Want to learn more? This is an excerpt from MB Raimondi’s QuickBooks Live Webinar titled “Customer & Vendor Tricky QuickBooks Transactions on April 30 2012. Go to The Sleeter Group’s QuickBooks Live Webinar page to sign up!


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About the author

MB Raimondi

MB (Mary Beth) Raimondi, CPA, CITP, MS Taxation is an Advanced QuickBooks Certified ProAdvisor as well as an Intuit Solution Provider. She holds certifications in Enterprise and POS and is a Sleeter Group Certified Consultant as well as a Chapter Co-Leader/Instructor for the National Advisor Network. She is also a charter member of the Intuit Training/Writing Network. She has used QuickBooks since the DOS version and has been teaching QuickBooks nationally to both end users and accountants/consultants since 1999. The focus of her practice in Trumbull, CT has migrated from a full time tax and accounting practice to mainly QuickBooks consulting, 3rd party integration and training. Visit her website at http://www.mbraimondicpa.com/

14 Comments

  • This is so much better than doing it by entering a journal entry and moving the credit to the wash account then doing a second entry to move the credit from the wash account to the new job. Thanks for sharing this.

  • @Joan – basically Steps 2 & 3 are issuing a refund check. It’s a nice way to put that!
    @DeBorah – Steps 2 & 3 create a credit in the Clearing Account, Step 5, the deposit to the Clearing Account, zeros it out.

  • Just an FYI – Doug Sleeter pointed out that there may be a problem with a cash basis balance sheet. So be aware! I, myself, don’t ever run a cash basis balance sheet. There are too many quirks. I run reports on an accrual basis and do journal entries and reversing entries to put everything on a cash basis.
    When I was trying to figure out if there was a problem – I was having a hard time following the logic of what QB’s was doing! Trading the balances themselves didn’t seem to effect the cash basis balance sheet but when you actually invoiced Job B and applied the payment, it got murky!
    Just wanted to let you know.
    MB

  • I often just set up an item to a clearing account and create an invoice to the customer/job with the credit balance, and a credit memo same date to the customer that I want to move it to. Might be a few less steps….

  • I had an issue where we had 3 over-payments from over 2 years ago that needed to be allocated to another job, and nothing I could do would work! I finally found this after a day of searching and it worked like a dream! Thank you soooo much you saved me!

  • I am having a really hard time with credits in a clients quickbooks. They are a wholesaler, selling to many stores which are listed as jobs under the corporate payer. The individual stores get an invoice and a credit once or twice a week, and they MUST be on separate documents. The corporate payer takes the credits immediately, and then pays the invoices within fifteen days to get the discount. A payment will apply to many different jobs/stores. And when a payment arrives there are always credits that don’t match up with invoices (jobs) that are being paid. This happens so much its not practical to transfer credits from one job to another… There has to be a better way! I would love to see all the credits listed along with the invoices under the master account and then just select which invoices are being paid/credits taken to match the check.

    Does anyone know if this is possible?

  • THIS IS AMAZING!! Thank you so much. I agree, it is so much better than using journal entries and it’s so easy too. Thank you!

  • I have a large non-refundable deposit from a customer for a project. I would like to apply part of that deposit as payment on another project. Would I use this same method for moving that deposit around?

    • Same idea. Though – how is that deposit recorded….as negative receivable? or did you use a sales transaction with an item posting to customer deposit liability account? If it’s a negative receivable – you can trade the balances the same way. If the latter – you might do credit memo for job #1 – using the customer deposit liability item and refund through the clearing account and then create a sales receipts for job #2 using the customer deposit liability item and deposit it into the clearing account. Make sense?

  • I am using Quickbooks Pro 2015 and Step 3 had me stumped. I couldn’t highlight the open amount. There was not a credit in the Discounts and Credits window. Any suggestions?

    I have done this successfully using 2 journal entries, but I was hoping this would be more transparent.

    • There shouldn’t be any difference in QB15 vs earlier versions. If you want to send me screen shots off line, I can try and troubleshoot. Or perhaps we do a quick remote.

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