Use journal entries to alter Accounts Receivables in QuickBooks Desktop

There may be times when you have to take a customer’s Accounts Receivables credit balance and transfer it over to another customer’s Accounts Receivables balance in your bookkeeping system, within the QuickBooks Desktop version.

The main reason you would ever have to do this is if one of your customers has multiple locations or subsidiaries and thus each is set up as its completely own and independent customer profile within your bookkeeping system.

Here is a popular scenario:

A check payment was received from a customer, but it was for an amount that exceeds the current balance due within their profile; so, the customer just instructs you to apply this overpaid (credit) amount to a different subsidiary’s Accounts Receivables balance.

You can indeed utilize the function of a journal entry to accomplish this in your books and here is how to do this in QuickBooks Desktop:

1. First, within your Chart of Accounts, create a new, but temporary bank account, and call it something like “Temporary Adjustments” or something like this. You will never actually utilize this new bank-type of account for any real bank transactions.
2. Next, open up the journal entry function within your QuickBooks Desktopsoftware.
3. Choose the “Accounts Receivables” account for the top account within your two-line journal entry. There will then be a “debit” to thisaccount as you will transfer the (negative) credit FROM this account. For the next line (within your two-line journal entry), choose that newly created temporary adjustments bank account. There will be a “credit” to the account you want to transfer TO.  Be sure the name field, in BOTH line items, has the name of the customer you are transferring the credit FROM.
4. Click Save but do not close out this journal entry quite yet.
5. With this journal entry still open, click on the “Reverse” function in the top menu bar.
6. Now you will notice your journal entry is reversed, the Accounts Receivables now has that same amount in the Credit field while that temporary adjustments bank account has an amount in the Debit field. The only change you will make in this reversed journal entry is simply just the customer within both name fields. The customer in this reversed journal entry is going to be the customer whom you are transferring the credit TO.
7. Now click Save & Close. Be sure to verify your temporary adjustments bank account has a net balance of zero and your two customers have the correct AR balances as you wanted.
8. In the future, just simply take that open credit balance now sitting in the new customer’s profile and apply to an open invoice. You can read how to do this in another blog (on this website) I have written about apply customer credits to open invoices.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.