 QuickBooks Online 2024 Delayed credit form Get ready and pack some trail mix because we're hiking on QuickBooks Online our audit trail to success First a word from our sponsor Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they Don't want to be seen with us, but but that's okay Whatever because our merchandise is better than their stupid stuff anyways like our trust me I'm an accountant product line. 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Let's go back to the first tab and this is the setup process We do every time we've got the first tab data input tab And then we're going to look at the results on the reports in the right or on the right Selecting the plus drop down in prior presentations We've been focusing in on the customer cycle Noting it will differ depending on the industry we are in the easiest process being we just depend on the bank feeds as The deposits come in Recording the income with the use of the deposit form Possibly useful if you have like a gig work scenario if you're working at a cash register like a food truck or something Then you're still on a cash-based system getting paid at the same time you do the work But you're probably gonna want to enter the sales receipts as they happen Then make the deposits and then match the deposits with the bank feeds and or bank Reconciliation if you're on an accrual system you'll be entering the invoice and then you'll have to receive the payment Record the deposit and then match the deposit with the bank feeds or with the bank Reconciliation now we're looking at some of these forms which are more unusual in the process such as the credit memo That was the reversal oftentimes of an invoice so that shouldn't happen all the time But if the product was returned you might have the credit memo and we looked at a refund receipt That would be a situation where they have already paid and you're gonna read they return the merchandise and then instead of issuing A credit memo you want to actually give them a check because you can have to pay them Back for the money that they paid you because they return the merchandise But you don't want to issue a check or a normal check or expense form because those are going to be connected to the vendor side Of things and you want to be tying this on to the customer side of things Therefore the refund receipt basically is a way to cut a check But be able to track it in the customer center as opposed to the vendor Center so now we want to go into a delayed credit So let's take a look at this from a flowchart standpoint before we get into too much detail and recap the process I'm gonna look at a quick quick books desktop flowchart But we're just looking at the flow of the forms which will in essence be the same for any kind of accounting software Now if we have a full service accounting system a cruel accounting system We enter an invoice now if we enter the invoice and then the customer comes back and returns the merchandise That's where the credit memo fits in perfectly because that will reverse the the Invoiced the sales and the accounts receivable However, if they already paid us then either they had an invoice and they paid us or We had a sale at our store like we sold a guitar or something or our inventory at the store itself And then they return it well now they've already paid us at that point in time So we wouldn't want to issue a credit memo usually but instead in that case That's when we would use the refund receipt which we talked about in a prior presentation Now you also might have a situation Where you want to give them like a credit that they can use in the future So instead of basically giving them their money back possibly you're saying something like well I'll give you a credit that you can then apply out to a future purchase or something like that now Usually when that happens you would like to record the transaction When it happens meaning I want to record the transaction at the point in time They return the merchandise or that I'm that I'm reversing the sale Because the journal entry should be input you would think at that point in time if you're committed to it if you think that they're actually going to take you up on the credit and Therefore you could still actually issue a credit memo which will result in a negative Accounts receivable, which isn't exactly proper for accounting purposes But it works kind of from an internal bookkeeping purpose. So we'll show that method Another way you could give someone a credit if you don't think that they're actually going to use the credit Or you think that they possibly may or may not use the credit and so you don't actually have to record it at the point In time you're offering them the possibility of the credit Then that's when you might use this delayed credit because the delayed credit as the name indicates will Allow a credit in the system So we'll be able to see the credit in the system But it's not actually going to record anything Until the point in time that you apply the credit say to a future purchase Like with an invoice so you might use that again if if it's if you don't want to give them a check and you Want to give them a credit, but you don't want to record the transaction at this point in time You're only going to record it if they take you up on the actual offer of The store credit at a future point any other time that you might want to give someone a credit as well If you give someone if you say I'm going to give you a credit for future purchases Then you might use the delayed credit method to do that because again It doesn't actually record the transaction at the point in time that you tell them about it, right? It'll record it once they once they take you up on the offer so the question then is should you be recording it at the at this point in time or Should you be reporting it when they take you up on the actual offer? And that could depend on how likely from a from a generally accepted accounting standpoint perspective How likely is it that they'll take you up on the offer and so on and so forth So let's take a look at the two options before I do I just want to point out this term credit as well because when we use the term credit it can get a little distorted note that From the customer side of things customers our customers when when they owe us money It's a debit we debit their account when they owe us money accounts receivable goes up with a debit So to us debits are like good on in that sense because that means that they owe us money and the asset is going up We did work and they owe us money if we credit their account that means to us We're bringing accounts receivable down So for us it's kind of like a bad thing because the credit the asset is going down unless we got paid unless we got money for it But to the customer that's kind of like a good thing. So when we say we're crediting their account We're usually saying we're reducing the amount that you owe us because we're crediting accounts receivable But then the term just starts to mean Credit is good to customers customers see credits are as good decrease in their account Or giving them a credit that they can apply to a future purchase a negative accounts receivable in essence That they can apply to a future purchase without paying for it fully, right? That would be the idea All right, let's try to do The whole invoice process again So we'll do this again, and we'll show the credit memo method and then we'll show this delayed payment thing Let's say customer Number one again once again customer number one so generic so generic lame Can't you come up with something like a name to make it a little more fun item? One I would but then I'd misspell it and so Then let's make this an inventory item just to make it a little bit more complex We're gonna say that the quantity on hand will put 10 on hand and as of the beginning of December Reorder points. I'll leave it blank Description is going to be item number one sales price. Let's say we sell it for 180. Let's say we Purchase it item description purchase description for 100 Therefore the the gain is going to be 80 and we'll have the sales tax involved as well Just to make it a little bit more complex saving it There we have it. What's this going to do when we record it? It's an invoice increase in accounts receivable 194 40 including the sales tax including sales by the 180 just the amount that we charge Increasing the payable sales tax payable that is 1440 and then decreasing the inventory by 100 the amount on the item that we said it was for and Then the cost of goods sold Income statement expense account in essence increasing by a hundred net impact on net income 180 minus a hundred $80 and the sub ledger will be impacted for customer number one tracking by customer and the sub ledger for inventory Will be impacted tracking the inventory by item Whoo, let's check it out save it and close it and check it out and let's go on over to the balance sheet I'm gonna range change up top from a 101 to 4 tap 1231 to 4 tab running it to refresh in it And we're gonna go into the AR accounts receivable close up this thingy and there's the 194 40 Go back. Let's go to the income statement changing the range in 010124 tap 1231 to 4 tab running To refresh in there's the 180 we can also see the cost of goods sold went up by 100 The difference being the $80 on the balance sheet. We know the incomes the Inventory account also went down by the hundred dollar cost back and then the the Sales tax payable board of equalization the board of equalization 1440 Okay, so then we also can see that we have a sub ledger for accounts receivable. Let's open that tap into the right right-clicking Duplicating I'm gonna go to the reports on the left-hand side and then close up the hand bogey Scroll down who owes you we're looking for the customer balance detail and And then we're gonna say there's customer number one. There's the 194 40 the total here 6045 92 tying out to what's on the balance sheet 6,000 what are The total five four seven five 92 over here five four seven five 92 Let's go back to the tab to the right right click again open up another report duplicating So we can look at the inventory sub ledger report, which is also important reports on the left Closing up the hand bogey. I'm gonna search this time for inventory valuations summary and Let's bring it on up to twelve thirty one two four running it to refresh in it There's our nine units because we sold one of them We're at a total of one four nine six twenty four tying out to the balance sheet at one four nine six 25 25 what did I get the four? I don't know so I think that ties out Okay, so so there it is now if they so let's go internally tab to the left sales tab Close in the hand bogey and go into the customers and we could see there's customer number one and We can see there's the invoice now if they've returned it at this point in time. They had not yet paid us Then that's when the credit memo would work perfectly as we saw in prior presentation Because the credit memo is going to reverse the accounts receivable, but let's imagine that they did pay us So let's say they receive the payment and then they're going to want like a credit of some kind So they receive the payment Let's say it happened on the second the payment method. Whatever. Let's just make it a check Reference number check number Undeposited funds. Let's put it directly into the checking account. There's the invoice What's the receive payment going to do? It's going to put it into the checking account and the other side's going to decrease the accounts receivable No impact on Net income. This is the standard process which would normally happen save it and close it. We'll check it out go into the balance sheet and Run it to refresh it. We're going to say checking account. Let's check it out and There's the payment 194 40 going back accounts receivable AR R is Now netting out goes up goes down looks correct. Let's go back to the internal Documentation we can see now the invoice has been paid as we can see here and is closed out now What if they come back and return? The merchandise well if they return the merchandise now Then we would think that we'd have to actually issue them a check, right? You'd have to give them back the 194 40 if that's what we want to do But we don't want to do it from the vendor side or else I'd have to inch into a vendor to pay the vendor Right, we want to keep it on the customer side of things and that's why you might have the refund receipt That we talked about last time So we might process a refund receipt if we have to pay them back now But what if we say well, well, we're not going to pay you back at this point in time What what we'll do is will we'll just give you a credit, right? We'll give you a credit for a future purchase at some future point in time So there's a couple ways we can do that We could we could give them a credit memo which will reverse the accounts receivable even though it's already been paid Which will result in a negative accounts receivable Which isn't exactly proper because we'd like to have if we did that way We would like to have a positive liability account But that actually works pretty well internally because we can see it processing internally or We can say we'll give you a Delayed credit now the delayed credit will not actually record something when we when we record it here so if we really expect them to take us up on the offer of the delayed credit you would think that we would want to have to Actually record it at this point in time as a liability or at least a negative receivable But if we have some if we have some odds that they're not going to take us up on it Then maybe the appropriate thing would be to say it's a delayed credit Because we're not thinking they're likely to take us up on it And if they do we will record it at the future point you see the difference here The question is do I have to record the liability now that I've committed to or not and from a generally accepted accounting standpoint That would most likely depend upon how likely it is that they would that they're going to take you up on On the offer that that you have so let's first start with a credit memo. I'll show you What what I'm talking about here. So let's say we entered a credit memo I'm going to say this is customer number one now. They already paid us But I'm still going to issue a credit memo to result in a negative accounts receivable so we'll say that this is going to be item one and So so there we have it and There's the item number one and we have the same issue We had last time whereas this is going to reverse everything exactly if you don't want it reversing to the sales Negative sales you could create the second one here, which I would call sales Returns and Alliances or something like that Copy it. I'm going to tab. I'm going to make this a service item And we're going to say the description is that but it's going to go to an account a new account Which I'm going to call it a income account other primary sales returns and allowances so I'm going to say okay boom and Then here. I'm going to put the 180 down here And I'm going to not put it up top. I'm going to say that this is just going to be zero So this will reverse everything It still comes out to the same dollar amount It's going to reverse everything but this item will reverse it to the proper income account and this line item still being here Means that they're going to return the inventory and we're putting the inventory back on the books If we're not getting the inventory back and we just want to issue a negative accounts receivable We would delete this line item and we would just do this line item which would result in the negative Credit, so let me show you what I mean here. Let's say save and close it and So if I go on over to the balance sheet now We can say okay run it and now we've got The accounts receivable if I go into the accounts receivable We can see it already we have the invoice and the payment already matched out But now we have this other credit Resulting in a negative accounts receivable for this period or at least for that particular customer Which again isn't properly correct because it should be a positive liability This would be similar to a situation where you had like unearned revenue, right? So it's where you have this issue of having a negative accounts receivable or a positive liability But from a bookkeeping standpoint that works well And you could adjust it at the end of the period if it's still Outstanding if they didn't take it take you up on the offer Before the end of the period the end of the month for example by doing an adjusting entry So if I go back on over the there's that the other side's going to income So let's run this one And so now you can see that we had the sales and then it reversed it into sales returns and allowances And then on the cost of goods sold side of things it reversed the cost of goods sold as Well because they returned the inventory so I'm going to go back and then back to the balance sheet We also see that the sales tax Down below has been reversed So we had to deal the sales tax that's been reversed and then if I go back on up to the inventory we can see the inventory has now been reversed and That's good And then if I go to the sub ledger for accounts receivable and run it to refresh it Now we've got we've got customer one has a negative Amount with a credit memo hanging out there again not exactly correct because it should be a positive liability But it's easy to track tied into the customer side of things from an internal perspective and then if I go to the The inventory we now have 10 inventory units back on hand because they've returned it 1,595 625 matching what's on the balance sheet 1,595 625 if I go internally to the tab to the left then we can see in this Custom in this area we had we can see exactly what happened This is why this works pretty well because you have the invoice you have the payment and then you have the credit memo Which says it's unapplied so although it's not exactly correct on the on the financials because it results in that negative receivable in other words, the receivables is understated by 19440 on the balance sheet and Instead we should have a liability But from an internal perspective the negative receivable is easier to do because then it tracks it within The accounts receivable area, which is where we want it because if I then make another Another invoice I can apply the credit to it right so let's say let's say later on They they purchase something and we apply the credit to it. I could say okay. We want a new invoice and then we're gonna say this is going to be for customer number one and Did this happen on the third? Let's say and Then we're we're going to be giving them an item let's say item to this time and Let's let's say it's a different item We're giving them and we're going to say that that this is item to sales price is going to be 200 Let's say and Income account sales tax still applied the cost is going to be Let's say 120 For our item, okay, so I'm going to say and I have to put 10 on hand and Boom, so we're going to put them on hand so we could sell it again. Boom. So now we're going to sell One of those items So I'm going to record it and then see if I can apply the credit to it So it's kind of a two-step process. So I'm going to save it and close it and so so now you can see here That if I go back into the invoice if I go back into it It says partially paid right so if I go back into it. Well, let's do it this way. Let's go into the edit over here Then now I can see down here that it's been Partially paid and they put the amount received the 194 40 from the credit memo They applied it out properly over here So so that's kind of nice and notice if they didn't do that automatically notice down here. It says Credit created by QuickBooks online to link credits to charges. So what it did is it made a payment form? That linked these two out. Let's edit to view it And so now we have a receive payment, which is usually the next thing you have on an invoice but instead of receiving money that's going to go into a Check-in account. It was just tied out to the credit. This is how they linked those two things together So we can record not only the transaction, but also link it internally So this works really nicely internally to see everything that's happening Even though it still results in that negative receivable. So if I go back up top now And I run the report again, and I go into my my accounts receivable You can see the the activity now going in and out of the accounts receivable And if I go into my sub ledger over here, and I run my sub ledger then We can see that We have the customer number one has a 2160 Remaining balance within it. So now we don't have that negative receivable It's just a timing difference if they take you up on the actual payment of The credit that was in there. All right, let's go back on over and now let's think of it Let's think of using the delayed payment. So let's do again. I'm gonna this time I'm gonna say that we have let's say we had a sales receipt So we're at a cash register and we did a sales receipt and let's say this is customer number two and We're gonna say Okay, and this happened. Let's say on four and We're gonna say the payment method. It was a check and do do do doot And it's going into the checking account and let's do item number one again item Number one so now they're paying us at the point of time. We do it. What's this gonna do? It's gonna increase not the accounts receivable But go right into the checking account instead and then the other side's gonna be that's for the full 194 the other side's going to revenue 180 now, let's actually make this in February so we could see a month by month February and the other side's gonna be going to Revenue and then sales tax on a payable 1440 inventory is gonna be going Down and cost goods sold going up net impact on net income 180 minus 100 or 80 Let's save it and close it and Check that balance sheet run it. We're gonna go into the AR So now we have another accounts receivable For the invoice is it there hold on a second. Let's run it again and go into it and Well, it's not in that counts receivable go back go back. It's in the checking account. We went on the checking account for so so there it is For the 194 sales receipt the other side's going to the profit loss Let's run it this time month by month and run it and so now we've got the 180 There's the cost of goods sold and then the inventory is impacted as well And so we already got paid against we're in essence in the same situation as if we had an invoice and then we got paid now Now let's go and internally to the sales Let's go into customer number two close up the hand boogie and now we're gonna say now Let's say that they want their money back or whatever now. I'm not gonna deal with so so this time We'll say let's use a delayed Credit So the delayed credit here which won't actually record anything at this point in time But we'll record it when they take us up on on it so customer number two and We'll say this happens on let's say oh three. Let's say Oh one two four and this will be item. Let's put the item number one again and So there it applies out so it's only showing the 180 not the sales tax at this time because it's not actually Recording anything and therefore even though that has the sales tax clicked off It's not gonna record anything with relation to the sales tax until they basically take us up on the offer So if I was to say save and close then Then you could see in here if I close the hand boogie that you have The credit that is in here this one's already been paid and now we have this credit now if I go back on over here Nothing's been recorded in like accounts receivable For this customer, I don't believe it's there and if I go to my sub ledger Run it Nothing's there. So so you can see that we don't end up with this negative This negative amount in here, which is kind of good But on the other hand the question is should be we be recording it or not? Because a negative receivable although it should be a positive liability is still better than not recording anything at all If we're supposed to be recording it at this point in time, right? So this would you'd want to use this if if you think they're not maybe not going to take you up on it So it doesn't actually record anything until until they take you up on it But you can see it internally in here or possibly like if again If you're trying to give someone if they got it if they got a coupon or something like that and or whatever And you wanted to enter it into the system, but they haven't actually Actually taking you up on the coupon But you want to mark it down so that if they did you have it in the system so that you can see it But it hasn't recorded anything something like that. It's where you might use this method So then if I was to make an invoice for this client, I could say make an invoice And it's it looks a little tricky because it's trying to pull in this credit item over here and also note that I don't think you can pull in Like just part of the credit So this is also you have to be careful because if if the credit was Like if you're paying for something that was a hundred A fat like a hundred dollars and the credit for was for 180 Then then You know that might cause a problem. Let's let's check it out If I go down here and say this is going to happen on let's say 040124 and and let's say that we purchased Something that costs more like we said item or let's say it costs less Let's say service item I'll say tab. I'll make a service item And we'll say let's say it would cost a hundred dollars for the service item And taxable we'll keep it at taxable. I guess we'll say save it And So so there we have it and then when I pull in this credit It's going to actually add it into the line item instead of like down here like we saw with the credits before So if I say add this It it adds it in here as a line item So now we've got item one negative and it's linked up So notice this item that we set up here also is going to Uh affect the inventory. I believe as well So you have to be careful with the inventory if they returned The inventory if you want them to be dealing with the inventory or not Otherwise, you might want to set up and just an item That is for this this particular process of the delayed credit Okay, so then so now we have Uh these two these two it still comes up with a negative 86 And you end up with a negative sales tax So that's a little bit wonky right because what you'd want to do is if this was higher If this was 200 Then then everything would work out. Okay, and this would basically clear out But let's just follow this through if it was lower Uh 100 And just to check it out I'm going to save it and close it and it says enter a transaction amount is zero or greater See it's causing it's causing us a problem To record it. So you have to be careful about that as well It's going to be diff more difficult to apply out like a partial credit So I'm going to bring it back up to 200 and so now it's at it's at 200 And then and then it nets out to 20 and then the sales taxes apply. So let's save it and close it And so now Now it's basically uh recording that item and again if I go into that invoice It shows up in the line items of the invoice and with the attachment instead of basically down below Like we we saw before in the credit So then if I go back on over to the balance sheet run it to Refresh it and I go into the accounts receivable Then we can see that amount of the invoice being in there and again It's a little bit kind of a little bit weird Because again, it doesn't record the whole invoice and then apply the credit because it's applying the credit at the same time In the top part of the form. So it's only showing us the net amount That's pulling into the financial statements So I'm going and that's because it's recording it at this point in time instead of recording You know the credit beforehand like we saw with the credit memo and then on the profit and loss Let's run the profit and loss we could see uh the 180 minus the 200 it's being recorded that way because We made a service item for 200 and then when we reversed the the the the credit item It was for an inventory item. So these are the two sales So that's the 20 net that was recorded and it did reverse The cost of goods sold as well And so it returned the inventory if I go back to the first tab It pulled in the sales tax. So if I go into the sales tax We can see that uh within here and then if I go back to the inventory Inventory We can see the impact on Uh the inventory going in and out as well. So let's go back on over and It also adjusted the inventory ledger over here So that's the general idea. So if I go back on over to the first tab Note that the general process would be If if you're trying to give a credit to someone the credit memo would be used if you're trying to reverse the accounts receivable If they already paid you with an invoice or a sales receipt You could still use the credit memo because it'll record the transaction and leave the credit Which will be a negative receivable on the books But it'll be nice and easy to to track internally from the bookkeeping standpoint where you can apply the future that credit to a future purchase Uh if you want to do a future purchase Or if you want to actually give them their money back That's when you would use the refund receipt And if you want to give someone The potential to apply a credit in the future that won't actually record the liability or a negative receivable at the point in time That you're offering it to them, which again would probably only be The proper thing to do if it's likely that they're not going to take you up on the offer or like a coupon situation Or something like that where because because then you don't know if they're actually going to do it or not And therefore you might not have the obligation to record it on the financial statements at this point in time So in that case then you might do a delayed credit of of some kind Which means you're going to see the credit there But it won't record it until the future point in time when they take you up on the on on the offer