Reversal of Finance Charges

This document explains how to credit out a finance charge manually.

For the system to automatically create credit finance charges, go to:

Accounts Receivable (Module 2)
- Finance Charge Entry & Editing (Task 4)
  - Calculate FC Reversals (Sub-task 9).

See the document “REVERSALS OF (OLD) FINANCE CHARGE INVOICES”. The Calculate FC Reversals sub-task will create credit finance charges only if there is nothing else on the customer’s accounts before the “finance charge / activity cutoff date” typed in during the reversal entry prompts.

If the customer has other activity on the account, but crediting out the finance charge is needed, a manual finance charge credit may be done. Go to:

Accounts Receivable (Module 2)
- Sales Entry & Editing (Task 1)
  - Enter New Sales Record (Sub-task 1)
    - NOTE: A finance charge credit may be applied to only one document. So a separate finance charge credit will be needed for each finance charge being credited off the customer’s account.
    - The important/necessary fields are listed below, in bold, with the number of characters in parenthesis.
    - First Screen:
      - 01. Invoice # :_____(6) Numeric. Assign an invoice number that is out of the range of the system generated invoice or credit memo numbers.
      - 02. Inv date:______(6) Enter a date in the current month
      - 03. Due date:
      - 04. Division#:__(2)
      - 05. Sale type:_(1) Use transaction type of "4". The system will prompt: “Check for duplicate credit memo or debit memo?”. Answer Y
      - 06. Customer # :______(6)
      - 07. Salesman# :
      - 08. Sale amt:________(8) Enter the amount of the finance charge credit as a negative.
      - 15. Apply to:______(6)
        
        Type in the finance charge document number this credit finance charge will be applied to.
        
        A finance charge credit may be applied to only one document; therefore a separate finance charge credit will be needed for each finance charge being credited off.
        
        If the credit finance charge is left un-applied, it will automatically be applied to itself, thus not clearing off of the account.
        
        The credit finance charge may be applied to one document in A/R, Task 3-(Change Apply-to #’s), at a later time.
        
        If the document number entered is not an open document, the following message appears: Invalid apply-to number, please reselect.
      - 16. St Tax flag: _(1) Enter a nontaxable tax flag from the pop up table.
      - 20. Department:__(2)
      - 21. Tax zone A :____(4) If you have a Tax zone for non-taxable sales, type it in here.
      - 22. zone A $ :0
      - 23 thru 27: Press the Enter key.
      - 28. P/O #: This is a 20 character alphanumeric notation. Type an abbreviation for your records, as an example: “CREDIT FINANCE CHARG”
    - The system won’t go to the second screen because it will be using the G/L account number from General Ledger (Module 4); System Management Functions (Task 32); Setup Automatic Interface (Sub-task 5).
  - Print an edit list using Sub-task 4 (Print Sales Edit List)to verify that the entries are correct.
  - When everything is correct, use Sub-task 5 (Post Sales Records to A/R Files) to post the entries. The sales posting register should be saved with the other sales posting registers. The total of the posting should go onto the A/R Daily balancing spreadsheet.

Reason for using Document Type 4 (Finance Charge) instead of Document Type 3 (Credit Memo):

Go to: (or check with your controller)

General Ledger (Module 4)
- System Management Functions (Task 32)
  - Setup Automatic Interface (Sub-task 5)
    - Change Interface Parameters (Sub-task 2)
      - The first screen prompts for the A/R interface parameters.  We are interested in:
        
        4. A/R Receivables:      110-00
        
        5. Finance Charges:      114-00
        
        6. FC Receivables:       112-00

When a document type 4 (Finance Charge) is used in Accounts Receivable (Module 2), either through Sales Entry & Editing (Task 1) or Finance Charge Entry & Editing (Task 4), the system automatically uses fields 5 & 6 of the automatic Interface parameters. Therefore, if you are using a separate General Ledger account number in field 6 (FC Receivables) instead of the regular Accounts Receivable G/L account number in field 4 (A/R Receivables), it is important to use a type 4 for the manual credit finance charges and not a type 3(Credit Memo). All the document types of 4 (Finance Charge) will use field 5 & 6 from the automatic interface parameters.

NOTE: If you have a line item for crediting finance charges, so you can use Order Processing for crediting finance charges, these credits will be a type 3 Credit memo, not a negative type 4 Finance Charge. So the Automatic Interface parameters, Field 6 Finance Charge Receivables won’t be used.

Parameter to check:

Go to:

Accounts Receivable (Module 2)
- System Management functions (Task 32)
  - Modify parameter files (Sub-task 22)
    - A/R – General, Look for:
      - SKIP’OTHER=
      - N-No includes 'Other' and finance charges (normal / std)
      - Y-Excludes 'Other $' and finance charges
      - F-Excludes finance charges but does include 'Other $'
    - This parameters tells the system if you want to include the “Other $” and/or finance charges in the customer master file, “Current year sales” and “Prior year sales”.

Note: The sales dollars for item types of Labor go into the “Other” column. So consider this before changing this parameter.

Reversal of Finance Charges - Manual