How do I allocate an unused customer adjustment note when no available transaction?

Question

Following an MMC migration from Sage, some historic Write-offs were unallocated.

The original invoices were created prior to the 2 years of transactions migrated.

The MMC process (for those accounts prior to the 2 years) was to create a journal entry:

DR Accounts Receivable / CR Retained Earnings, for each customer balance.

The write-offs were from within the 2 year migration period and so exist in the system

So there is no longer an invoice against which to allocate the CAN.

The CAN remains 'unused'. How do I close it correctly?

Thanks.

Rav · Answer

Glad to hear its only a handful of transactions. I'm not quite sure why the migration team have handled it in that way but that's good feedback for us to get clarification on to sharpen up the process.

ben · Answer

Hi @Rav

Thanks. This is the same solution I came up with.

I have no idea why MMC did this with these write-offs.

There were plenty of invoices and credit notes (including write-offs) that they created, for pre 2 year migration period, that I was able to allocate correctly.

Luckily it's only 4 transactions to correct!

Rav · Answer

Hey Ben

I've had a chat about this and have a suggestion which I'll outline below however before that, I have to preface this and state explicity that you should consult your accountant for qualified advice on handling this. We're not accountants, bookkeepers or tax agents so the below is only a suggestion to pursue at your own discretion.

So with that said, to get rid of the credit note you could potentially create an invoice for the balance of the credit note that you need to write off dated 1 July of the financial year your migration took place.

Find the journal for the opening balances dated 30 June, reduce both Accounts Recievable and Retained Earnings by the amount of that credit note. Then check the total of this opening balance journal and confirm that the debit total equals the credit total.

If you still have a balance on Accounts Receivable go to the Aged Debtors report and look for any entries for your customers that show $0.00 or a negative amount. These may relate to invoices issued before the 30th of June but paid after the 1st of July. These will have to be treated in a similar manner.

Again, I would strongly recommend to consult an accountant as we cannot provide qualified accounting and/or taxation advice.