Problem:

From time to time you may find that someone has paid for inventory on an A/P bill by coding the bill to COGS or the Inventory asset account, but you later find someone also recorded item receipts which cannot be deleted because they have been posted.  You still need to clear out your item receipts in order to clear out your Purchases Accrued Not Due account.

Follow the steps below to resolve this issue. 

Resolution:

You need to create an invoice to clear the item receipts, create a debit memo that posts to the same gl account as the original bill, and then apply the debit memo to the new A/P bill to clear it out. This resolution assumes that the bill coded to COGS or Inventory cannot be voided because the payment has been reconciled in a completed bank rec. If this has not occurred, you can simply void the bill payment, void the bill, re-enter the bill and attach the item receipts, and then re-record the payment.

  1. You will need to determine, based on how the items were paid for previously, what to code the debit memo to. For example, if the item was paid for on a bill-other and someone used an asset account, then your assets are overstated on the Balance Sheet. So, you will use that asset account on the debit memo.
  2. Go the Vendor’s account and create an A/P bill for the same date as the original bill was created for. 
    • Attach the item(s) to the bill in the Items tab.
    • Save the bill, which will post a Credit to A/P and Debit Purchases Accrued Not Due as well as clear your item receipt from the open inventory receipts report.
  3. Create a debit memo that’s coded to the asset/COGS account used on the first bill.
  4. Use the debit memo to clear out the Bill-Inventory:
    • Go to Pay bills
    • Select the Bill you just created.
    • Select the apply credits button and select the Debit memo you created and enter the amount of the debit memo in the “applyinvoice” column. 
    • Select Close.
    • Select Pay Bills.

We cannot make suggestions as to when you should date your inventory invoices or debit memos, as it relates to closed financial periods; however, we can tell you the following:

  • The invoice date should not be prior to the item receipt date
  • The debit memo date should not be prior to the invoice date
  • You should not apply the debit memo at a date prior to the debit memo date.