Apply Credit Memo or Unapplied Payment

Note: An Unapplied Payment is extra money on the customer's account. It could be there because at the time of the original payment on-account, not all the money was applied to open invoices; thereby leaving an "unapplied" payment. Or the customer gave a "pre-payment", which would also show on their account as "unapplied".

Important Note: In Task #2 - Cash/Receipts Entry & Editing, when applying the credit memo or payment on the second screen, if the whole amount isn’t applied; the customer’s account will have a left over computer generated credit memo. This will not clear away at month end. It will show up on the customer’s statement. See documents titled: Credit Memo - Determine Its Origin and Credit Memo - Backtracking Computer Generated CM. As long as the whole amount is applied to open invoices, at month-end after A/R is balanced, the reports ran, and the “Clear paid invoices from A/R Open” program is finished, the computer generated debit and credit memos should clear away. The customer never sees them.

IF there is only one unapplied amount being applied to only one invoice, which is equal-to or greater-than the amount of the unapplied payment or credit memo, use Task #3 (Change Apply-to #) in the AR module. See the document titled: Task 03 - Changing Apply-to Numbers for complete instructions.

IF you need to change multiple payments or credit memos to one or more invoices, the function is now available in Task 27 - Customer Account Inquiry. For more details, reference the document Task 27 - Customer Account Inquiry.

This document pertains to multiple unapplied amounts and/or multiple invoices.

Go to: Accounts Receivable (Module 2)
- Cash Receipts Entry & Editing (Task 2)
  - Enter New Cash Record (Sub-task 1)
    - Line 11-Apply Credit: Use TAB key to get a list of unapplied credit memos or payments. In order for the Credit Memo/Payment to appear on the list, it must already be posted. Also, it must be applied to zero. When the TAB key is used a list box will be on the screen displaying all of the unapplied credit memos & payments. Use the Y key to select as many as 35 credit memos or payments. When finished selecting credit memos or payments, press the back arrow or escape key to exit the list box.
      - NOTE: A credit memo cannot be applied to another credit memo or payment. The same goes for a payment -- it cannot be applied to a credit memo.
    - Line 12-Credit $: (credit memo/unapplied dollar value). The amount of credit memo/unapplied selected on line #11 appears on line 12. The amount is added to your "Total to Apply" amount, it is not added to the "Amount Received" or "Change to AR" on the cash edit or posting reports.
    - Continue to the next screen and choose the open invoice(s) to apply the credit or unapplied payment against.

IMPORTANT NOTE:

The system internally creates a debit memo for the same amount of the credit memo or unapplied payment. The original credit memo/unapplied payment is automatically applied to the computer-generated debit memo.

EXAMPLE: Original credit memo #220052 is for $100.00. The computer-generated debit memo #500001 (the system assigned # comes from a counter) is for $100.00. Credit memo #220052 for $100.00 will be automatically applied to debit memo #500001, also for $100.00.

At the same time the computer also internally creates credit memos for whatever you apply to on the second screen, and applies them to the same invoice (sound confusing? - read further).

EXAMPLE: On the second screen, the $100.00 credit memo, mentioned above, is being used to pay 2 invoices: invoice #40004 for $70.00 and invoice #40011 for $30.00. The system will create 2 credit memos: #300001; (the system assigned # comes from a counter) for $70.00 (applied to invoice #40004), and #300002 for $30.00 (applied to invoice #40011).

Therefore the customer's account will look like this:

Invoice #40004 (original), $70.00
Invoice #40011 (original), $30.00
Credit memo #300001(system generated) -$70.00, applied to invoice #40004.
Credit memo #300002 (system generated) -$30.00, applied to invoice #40011.
Debit Memo #500001 (system generated) $100.00
Credit Memo #220052 (original)-$100.00, applied to debit memo #500001.

The overall net affect on the customer's record is zero. A credit memo was selected to pay invoices, thereby creating a "wash".

Second example not using all of the $100.00 credit:

EXAMPLE: Original credit memo #220052 is for $100.00. The computer-generated debit memo #500001 (the system assigned # comes from a counter) is for $100.00. Credit memo #220052 for $100.00 will be automatically applied to debit memo #500001, also for $100.00.

EXAMPLE: On the second screen, the $100.00 credit memo, mentioned above, is being used to pay 2 invoices: invoice #40004 for $70.00 and invoice #40011 for $10.00. The system will create 3 credit memos: #300001; (the system assigned # comes from a counter) for $70.00 (applied to invoice #40004), and #300002 for $10.00 (applied to invoice #40011) and #300003 for the amount of $20.00. This credit memo is left on the customer’s account applied to nothing. This credit memo will be dated the day this was posted.

Therefore the customer's account will look like this:

Invoice #40004 (original), $70.00
Invoice #40011 (original), $10.00
Credit memo #300001(system generated) -$70.00, applied to invoice #40004.
Credit memo #300002 (system generated) -$10.00, applied to invoice #40011.
Debit Memo #500001 (system generated) $100.00
Credit Memo #220052 (original)-$100.00, applied to debit memo #500001.
All of the above documents will be cleared off of the account, at month end when the “clear paid invoices from A/R open” task is completed.
Credit Memo #300003 (system generated) -$20.00, applied to zero. After the clear paid invoices in completed at month end, this credit memo will be left on the customer’s account.

The overall net affect on the customer's record is zero. A credit memo was selected to pay invoices, thereby creating a "wash".