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Transferring a credit from one job to another

Sometimes you have a customer who hires you for several jobs. This is great! For one thing it means they like your work. For another thing it means revenues for you and that is the lifeblood of every business. Many of us have been in the situation where perhaps we have more than one job going for the same customer. Maybe a construction company doing build-outs for 2 different locations. Ideally you will want to tell your customer that in order to keep the accounting clean you need to invoice separately and get paid separately. Most customers will appreciate this because they will want to job cost your work separately as well. This is always the cleanest way, but it isn’t always the most practical. Also we have seen plenty of situations like this where a customer over pays on one job and asks you to apply the credit to the other. When this happens we are presented with a problem in QuickBooks. The payment was assigned to the one job when it was originally received, and will show an over payment on that job. If you go to your customer payments screen and pull up the other job, you will not find the credit there such that you could simply apply it. The only way to fix this is through a series of journal entries. I take that back. You could do some QuickBooks gymnastics with credit memos and invoices – but that’s messy. We like clean. Theoretically you would simply book one journal entry debiting Accounts Receivable for the one job and crediting Accounts Receivable for the other so that you could simply transfer the credit and then apply it. Here we run into another obstacle. QuickBooks in order to protect you from yourself does not allow you to post to more than one Accounts Receivable Account or Accounts Payable Account in the same transaction. You could make quite a mess of your books if you don’t know what you’re doing – especially if you don’t know your debits and credits. So in essence you have to accomplish this by splitting it up into 2 entries. How do you do that? Funny you should ask. We set up a clearing account and run it through there. The clearing account always has to be zero before you walk away from the computer or close QuickBooks. If it is not zero something is wrong and all kidding aside you really want to fix it immediately or start over by deleting anything you posted there because it will be much harder to figure out later on. Then you will have to hire us to log in remotely and fix it for you. And we love that, but frankly we would rather you hire us for more interesting things where you will really benefit from the money you spend with us.

So what does this all look like? Well first let’s create the “Clearing Account”. I always set this up as a “Current Asset” – it really doesn’t matter as long as it’s on the balance sheet so you have an account register to work with and I like Current Assets because it puts it near the top of the chart of accounts.

First, open your Chart of Accounts:


Then Add a New Account:


Set it up as an Other Current Asset:


Then Name the account “Clearing”, and choose Save and Close.

Once you have done this you are ready to book the journal entries to transfer the credit over from one Job to the other.

This video tutorial will show you how.

Description:

Symbol To Look For:

Video Tutorial:

   

 


 

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