How would you preform the journal entries for a client that is disputing claiming a shortage, but are deducting that from their payment to us that is an accounts receivable. I am counter disputing as I have signed BOLs and proof, how do I write these entries, so that I can show the deduction, but also have the amount show as a payable for the future when repaid. If this is not the right place to ask this question sorry. Thank you for your help.
Help with journal entries for Accounts Receivables
Answers
Hi,
There seems to be some confusion in the question. Interpreting your question, your customer has claimed a shortage in delivery and issued a credit memo to you. However, you have signed BOLs as evidence that there was no shortage.
Thus, as per your customer your receivable balance should be reduced by that much where as you say it shouldn't be and you are counter disputing the same.
Are you planning to file a legal dispute for the said balance? or are you simply going to have a negotiation and conversation with your customer about the disputed balance?
In case of a legal dispute, i would seek an advice from your attorney whether to record the credit memo or not!
or you can record that as a credit memo against the invoice and record it accordingly.
Let me know if this was helpful! I would still seek some expert's advise, who may have encountered similar situations before.
1
Or you can use Bed Debt Allowance Account for the time being until the issue is resolved. You can always adjust the Bed Debt Allowance account based on actual result of your dispute. That will keep your AR balance same as invoice and will not be adjusted.
I would almost consider the use of a contingency/suspense account to book the difference until it is figured out. But honestly... I would leave the receivable open for that customer in the amount that has not been paid, essentially just apply a partial payment until it gets figured out. If the customer is right, just reverse the entry. I think its pretty straight forward unless I am missing something....
Good luck
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Accounting