A user creates a client retainer in Core and a vendor bill for some expenses, which shows up in the Expense Entries screen. These expense entries for the vendor bill are approved. Other charges along with these expense entries are billed and the retainer is applied on it in the Invoices screen. Next, user sends an A/P check for the vendor bill payment to the vendor. User has deposited the retainer payment from the client along with the payment for the invoice. However, the vendor returns the A/P check. As this was done in a previous or closed accounting period on a cash basis, user now wants to do the following:
- Reverse the A/R and A/P side of the vendor bill transaction in Core
- Reverse the application of the retainer on the A/R invoice without having an incorrect amount show up under client's transactions
- Use a method for the above that does not void any A/R or A/P transactions
Here is a summary of the transactions that the user needs to make:
- A/R transaction for retainer received
- A/P transaction for vendor bill created
- A/R transaction for invoice created and retainer applied to it
- A/P transaction for check written to pay vendor bill
- Deposit transaction that moved retainer and invoice payment into the checking account
To resolve the issue:
1. Create the following cash-based entries in General Journal:
a) A/P cash General Journal transaction to void the A/P check sent to the vendor.
b) A/P cash General Journal transaction to void the vendor bill
c) A/R cash General Journal transaction to void the application of retainer on the invoice
d) A/R cash General Journal transaction to void the vendor bill cost on the invoice
2. After this, create a new retainer payment in the Payments screen as the original retainer payment has already been used, reconciled and cannot be voided.
3. Then enter the last A/R cash General Journal transaction to void the effect of creating a new retainer in another accounting period as it is being reused.
Note: Doing this increases the amount of client retainer paid or shows up under client's transactions, but you have a paper trail and General Journal that will back up the reasons for the discrepancies.