Negative Balance in Accounts Receivable
This situation will occur if you have used the Account Receivable account as the allocation account on either a service or professional invoice. If caused by Item invoices, check the linked income account for tracking sales on the Item Information tab. If it is your Accounts Receivable account, you will need to change this account to an income account: a 4-nnnn account. Transactions like these have debited and credited AR when the sale is recorded. Not only is your AR understated, but you're booking no income.
When these erroneous sales are paid by the customer, the payment of the invoice will reduce the AR balance even further, with a Debit to cash or undeposited funds, and a Credit to A/R.
If you have done this only a couple of times, just reverse the invoices and payments, and reenter them.
If you have been doing this for a long time, the A/R balance could be a very large negative number. Adjust it with a journal entry. Debit A/R to bring it to where it should be, and credit the sales income account. You may have to break up the income (sales) allocation to several income accounts, representing the various income accounts that should have been used on the Service or Item sales. You can assign these amounts to mulitple departments or jobs on each line.
Determining the actual dollar amounts to book in this transaction can be challenging. It will require a lot of scrutiny of individual transactions, using the Account Transaction Report for the Accounts Receivable. You will be looking for transactions that debit and credit A/R. The ID# column will show the same ID for both the debit and the credit.
- If the invoice is closed, use the dollar value here to add to the journal entry you will be making to adjust the Sales and A/R
- If the invoice is open, change the transaction, allocating to the correct income account. For an Item invoice, make sure you have corrected the item under the Item Information screen.