QuickBooks Asia

You cannot use more than one A/R or A/P account in the same transaction

When creating a journal involving Accounts Receivable (AR) and Accounts Payable account, or two Accounts Receivable accounts or two Accounts Payable accounts, a warning message “You cannot use more than one A/R or A/P account in the same transaction” will prompted on the screen and not allowing you to save the transaction.

This is one of the most common issues a user face when trying to contra between Suppliers and Customers, between Suppliers or between Customers.

If you want to contra between Accounts Receivable and Accounts Payable, more than one Accounts Receivable accounts, or more than one Accounts Payable account; you have to do it in two separate journals. Usually, I will use a Contra account to resolve it.

Example: 

ABC (Customer) owes you $100, and you owe DEF (Supplier) $100.  Supplier DEF wanted you to use the $100 which you owe them to pay on their behalf to ABC. You need to transfer the Accounts Payable, amount owing to DEF, to ABC account. So, how to do it?

Since QuickBooks does not allow having Accounts Receivable and Account Payable in one General Journal transaction, that is, debiting Accounts Payable $100 and crediting Accounts Receivable $100. You have to break it out into two General Journal transactions.

Usually, I prefer to create a dummy account, Bank account type, and I named it as Contra account. Next, I will do the two journals. First journal will be debiting Accounts Payable $100 and crediting Contra account $100.  Second journal will be debiting Contra account $100 and crediting Accounts Receivable $100.

In this case, the Contra account will be zero off and will not show in the Balance Sheet report. However, you have to do a Receive Payment to knock off the Outstanding Invoice with the Credit balance (Journal) so it will not show as an outstanding amount in AR Ageing report. As for Accounts Payable, you have to do a Pay Bill to offset the Bill with the debit journal too.

The above method does resolving the issue for contra between Accounts Receivable and Accounts Payable, but I prefer to use direct payment method to contra between Accounts Receivable and Accounts Payable in QuickBooks.

Same as the above Journal method, I create a Contra account, Bank account type, then, I do a Pay Bill to supplier DEF. In the Pay Bill screen, instead of selecting your normal bank account for payment, I use Contra account. Enter the $100 bill payment as per normal. Next, I will do a Receive Payment of $100 from Customer ABC into the contra bank account.

In this way, I cut down the two general journals, and result is the same as the general journal method, that is, zero off Accounts Payable, Contra account and Accounts Receivable account.

 

Adjustment

10 Sep 2009, created an invoice (invoice number 1001) to Customer ABC Pte Ltd for $1,000.00.

15 Sep 2009, ABC Pte Ltd sends you a cheque of $950.00 for the payment of invoice 1001. Customer deducted the $50.00 off as a discount you had agreed earlier. However, your Accounts Assistant had entered it as $1,000.00 (full payment).

20 Oct 2009, your Accounts Assistant created a Credit Note $50.00 for ABC Pte Ltd.

31 Dec 2009, accounts closed. Nobody spots the mistake. Accountant did not do any Bank Reconciliation in QuickBooks.

10 Apr 2010, Accountant spots the mistake.

If you are the Accountant, what will you do to adjust these transactions?

Since this account had already closed, you should not go back and edit the transaction (that is 15 Sep 2009, Receive Payment), unless your Auditor allows (In most cases, the adjustment will be done via an Audit Adjustment). However, if your adjustment were to make in this financial year, below are the steps you can do to resolve your issue.

The Bank account overstated by $50.00; you should pass a journal to revert it back to $950.00 instead of reflecting as $1,000.00. The Accounts Receivable account understated by $50.00, you need to debit back $50.00 to balance up the account. Therefore, the General Journal entry (dated 10 Apr 2010) should be debiting Accounts Receivable account $50.00 and crediting Bank account $50.00.

Now, your Bank account balance is $950.00, which is correctly stated. Besides, your Accounts Receivable account is also correctly stated, zero balance.

Although your Accounts Receivable account is zero balance, the debit journal (dated 10 Apr 2010) and credit note (dated 20 Sep 2009) are still shows in the Accounts Receivable Ageing report. You need to do a Receive Payment (physical receive $0.00 amount) to offset the Credit Note with the Debit Journal.

Was this a realized or unrealized exchange gain/loss?

During my QuickBooks demonstration, a lady asked me, ‘I have a US dollar bank account, I deposited US$10,000.00 into this account when the exchange rate was at 1.42 (Home currency was in Singapore dollar). This month, my exchange rate for US dollar against Singapore dollar was 1:1.38. So, how should I record the ‘realized’ exchange loss of S$400.00 in this case?’

I consider it as ‘unrealized’ exchange loss instead of ‘realized’ exchange loss; as the US$10,000.00 was still physically in the bank account. Unless, we physically withdraw out the amount from the US dollar bank account then it will be consider as realized exchange loss. Am I correct? Let me know if you think that I should consider it as a ‘realized’ exchange loss instead of ‘unrealized’ exchange loss.

If this were to be an unrealized exchange loss; then, how should I do a home currency adjustment in QuickBooks?

Home currency adjustment can be done via a General Journal Entry. For QuickBooks 2009/10 (Asia) version, go to Company menu, and select Make General Journal Entry function. 

From the Make General Journal Entry form, ‘check’ the check box for ‘Home Currency Adjustment’ which located at the bottom of the Make General Journal Form. Then, enter your Journal detail such as date, entry number and accounts to be debited or credited.

For this case, you can debit S$400.00 into Unrealized Exchange Gain/Loss account (Change this account to Realized Exchange Gain/Loss account, if you think that this exchange loss should be realized) and credit S$400.00 into US dollar bank account.

Void Cheque in QuickBooks

I received a support email from one of my client:

“I had a cheque issued in financial year 2008 which was not presented until now.  Since I had already closed my accounts for 2008, can I still VOID the cheque in my Quickbooks 2003 software?”

This is an accounting question, got nothing to do with QuickBooks’ feature.

If I were to be the Bookkeeper who did this transaction, I will not use Void Cheque in this case.

What will happen when I voided a cheque which was paid out to a Supplier?

When you voided a cheque the double entry will be debiting Bank account and crediting Accounts Payable account. In layman term, the amount of money that you issued will be returned to the Bank account and Accounts Payable will be increased back to its original amount that you owe to the supplier.

When Cheuqe is voided those reports such as Balance Sheet, Trial Balance, Bank Reconciliation and Accounts Payable reports that you have printed earlier will not be valid.

Besides, the accounts in this case had already been closed so we shall not do a void cheque.

Then, how to remove this unpresented cheque?

You can consider creating a General Journal Entry to “offset” this unpresented cheque. The double entry for this case will be debiting Bank account and crediting Accounts Payable account (Note: the date of this General Journal should not be before your closing date).

During the next Bank Reconciliation, you can knock off this General Journal Entry against the Unpresented Cheque.