Receivables creates adjusting accounting entries to reflect invoicing activity against your customer commitments based on transaction type. Receivables provides the following commitment transaction types:
| Deposits | The accounting reversal is made by creating a receivables adjustment in Accounts Receivable to the invoice for the total of the invoice lines. This adjustment has the effect of reducing the invoice's payment schedule by the amount of the invoiced items (tax and freight amounts may be deducted from the deposit balance) and creating the reversing accounting entries. If, however, the amount of the invoice exceeds the remaining commitment balance, Receivables only creates a receivables adjustment for the remaining commitment balance. |
| Guarantees | The accounting reversal is made by creating a receivables adjustment in Accounts Receivable to the guarantee for the total of the invoice lines. This adjustment has the effect of reducing the guarantee's payment schedule by the amount of the invoiced items (tax and freight are not deducted from the commitment balance) and creating the reversing accounting entries. If however, the amount of the invoice exceeds the remaining commitment balance, Receivables only creates a receivables adjustment for the remaining commitment balance. |
You can define multiple transaction types with a class of either Deposit or Guarantee to classify or group your commitments for reporting purposes. Transaction types for commitments also provide additional control features, such as accounting controls, printing controls, and other defaults. You can define transaction types in the Transaction Types window. See: Transaction Types.
When you define transaction types for commitments, you can define them for both deposits and guarantees. The transaction type class determines whether it is of type deposit or guarantee.
| Class | The class is used to distinguish transaction types. When defining commitment types, use a class of either Deposit or Guarantee. |
| Open Receivable and Post to GL | These fields control posting to your general ledger and the updating of customer balances. Receivables sets these fields to Yes when you define transaction types for commitments. |
| Allow Freight | This field is used to control freight charges. Receivables sets this field to No when you define transaction types for commitments. |
| Tax Calculation | This field controls tax charges. Receivables sets this field to No when you define transaction types for commitments. |
| Creation Sign | This field is used to specify the creation sign of your transaction. This field is set to Positive Sign when you define transaction types for commitments. |
| Natural Application Only | Use this field to determine whether you want to restrict the direction of your transaction balances when applying payments. For example, if you invoke Natural Application and have an invoice with an amount due remaining of $300, you can only make applications that will reduce this amount towards zero. This field is set to Yes when you define transaction types for commitments. |
| Allow Overapplication | This field determines whether you want to allow over applications against items with this transaction type. This field is set to No when you define transaction types for commitments. |
| Receivable Account and Revenue Account | These are default accounts used by the Transactions window. You can accept these defaults or enter other accounts when you enter your commitments. For guarantees, enter the Unbilled Receivable account in the Receivable Account field, and the Unearned Revenue account in the Revenue Account field. For deposits, use the Offset Account field in the Deposits tabbed region to record the offset account for this deposit. |
| Invoice Type | This is the transaction type used for invoices that reference a commitment. If you create a deposit, then all invoices that reference this deposit would be assigned to this invoice type. You should choose an invoice type that has Post to GL and Open Receivable set to Yes. Receivables displays a warning message if the invoice type you choose has Post to GL or Open Receivable set to No. |
| Credit Memo Type | This is the transaction type used for credit memos that reference a commitment. If you create a deposit, then all credit memos that reference this deposit must be assigned to this credit memo type. You should choose a credit memo type that has Post to GL and Open Receivable set to Yes. Receivables displays a warning message if the credit memo type you choose has Post to GL or Open Receivable set to No. |
Below is an example of the accounting transactions that Receivables creates when you record a deposit and an invoice against this deposit.
Enter a deposit for ABC Company of $10,000. When you record this deposit you can enter AR Trade as the debit account and Unearned Revenue (or Offset Account) as the credit account. Receivables automatically creates the following accounting entry as described in the table below:
| Account | Debit | Credit |
|---|---|---|
| AR Trade (Deposit) | $10,000 | |
| Unearned Revenue (or Offset Account) | $10,000 |
You can print the deposit invoice and mail it to your customer for payment. ABC Company receives the invoice and pays you the amount of the deposit.
ABC Company places an order for $500 and would like to draw against their commitment for this order. You enter an invoice for ABC Company for $500 and reference their $10,000 deposit. Receivables automatically creates the following accounting entry as described in the table below:
| Account | Debit | Credit |
|---|---|---|
| AR Trade (Invoice) | $500 | |
| Revenue | $500 |
Receivables then automatically creates a receivables adjustment for the invoiced amount against the invoice. The result is an amount due in Accounts Receivable of $0 (Note: In our example the $500 invoice does not include tax and freight.) You can print and send this invoice to your customer to provide them with a record of the activity against their commitment. Receivables creates the following accounting entry, as described in the table below, to reflect this adjustment:
| Account | Debit | Credit |
|---|---|---|
| Unearned Revenue | $500 | |
| AR Trade (Invoice) | $500 |
Therefore, ABC Company has no balance due for this $500 invoice, and an available commitment balance of $9,500.
Below is an example of the accounting transactions that Receivables creates when you record a guarantee and invoice against this guarantee.
Enter a guarantee for ABC Company. ABC Company agrees to purchase a specified amount of product from you, and you would like to track progress against this guarantee, and record it in your general ledger. The amount of this guarantee is $10,000. When you record this guarantee you can enter Unbilled Receivable as the debit account, and Unearned Revenue as the credit account. Receivables creates the following accounting entry as described in the table below:
| Account | Debit | Credit |
|---|---|---|
| Unbilled Receivable | $10,000 | |
| Unearned Revenue | $10,000 |
You can print this guarantee in the form of an invoice if you wish.
ABC Company places an order for $500 and would like to draw against their commitment for this order. You enter an invoice for ABC Company for $500 and reference their $10,000 guarantee. Receivables automatically creates the following accounting entry as described in the table below:
| Account | Debit | Credit |
|---|---|---|
| AR Trade | $500 | |
| Revenue | $500 |
Receivables then automatically creates a receivables adjustment for the invoiced amount against the guarantee. Therefore, ABC Company owes $500 for this invoice, and has an outstanding commitment balance of $9500. Receivables creates the following accounting entry, as described in the table below, to reflect this adjustment.
| Account | Debit | Credit |
|---|---|---|
| Unearned Revenue | $500 | |
| Unbilled Receivable | $500 |