Refund of Prepayment Invoice

[anu_uma]

Entered a prepayment invoice, validated and create accounting it, made the payment for that for Rs.12,500.00 and create accounting also.

Enterer a std Invoice of Rs.10000, create accounting and apply with the prepayment....

now the Prepayment invoice balance is Rs.2500

Supplier need to return it to us. to receive refund in AP

any one can share their knowledge on this issue...........

[Dhananjay]

Hi

For a Debit Balance of Rs.2,500/- in Supplier A/c a Credit Note/ Credit Memo needs to be raised and payment received from supplier needs to be adjusted against this credit note. Please follow as under :

1) Raise Credit Note : Payables >>>>Invoice>>>>>Entry>>>>Invoice
(This will be for amount of payment received from supplier)
2) Approve Credit Memo : Invoice >>>>Approval
3) Record Refund : Invoice >>>>>Actions>>>>Pay in full >>>>Save

Accounting entry's will be as under :

Supplier Payables A/c Dr.
Charge A/c Cr.

And on receipt of cheque from supplier :

Bank A/c Dr.
Supplier Payable A/c Cr.

Hope my reply will help you to solve your doubts.

Regards
Dhananjay

[raviteja.manchu]

there is one more solution for your case:

just raise a standard invoice and in the distributions enter the cash clearing/cash account and approve that invoice.so the accounting will be

cash/cash clearing a/c dr
ap liability a/c cr.


and adjust this invoice with the prepayment the the accounting entry will be


ap liability a/c dr

prepayment a/c cr


finally the accounting will be


cash/cash clearing a/c dr
prepayment ac/ cr.


cheers,
ravi manchu,
+919908377739.

[Upendra]

But, better always have dummy (Standard) Invoice against the Prepayment and accept the Debit Note against Dummy (Standard) Invoice so that you will have control over the Supplier balances. And always follow Standard Operating Procedures (SOPS) to have same kind of work around. Otherwise, In future, One cannot understand what was happend in the past.

[Upendra]

Dear All,

This topic was many times discussed in this forum. Many consultants have shared their valuable opinions and ideas in this regard. However, there are instances where people were not understood the workflow behind prepayment and application of prepayment and workaround.

As Dhananjay said, raise a Credit Note.

I will explain what happens in ANU_UMA scenario if you raise the Credit Note:

Prepayment made is Rs.12,500/- and Invoice is Rs.10,000/-. At present, if you see the Supplier balance, it stands at Rs.2,500/- Debit Balance. At this stage if you raise a Credit Note on Supplier, it again reduces the balance from the Supplier Account resulting the the Supplier balance will stand at Rs.5000/- Debit.

Please remember that in AP, Debit and Credit Memos will reduce the Supplier balance. Now, how do we account refund.

In the other one's advice, he suggested to change the distributions to Cash Clearing Account. But, When Cash Management is implemented, it leads to reconciliation problem.

I don't say, that my opinion is final, but I request and welcome valuable suggestions on this matter.

As I already discussed in my earlier reply to somebody on this forum:

My work around is:

Step 1:
Please Account the Dummy (Standard) Invoice for the amount equal to REFUND:

Step2:
Adjust that Dummy (Standard) Invoice to Prepayment.

Step3:
Again generate a Debit / Credit Memo against the Dummy Invoice.

Step4:
Accept the refund against the raised Debit / Credit Memo.

Please don't take my critics otherwise.

Upendra Donepudi

[vijayasarathyr]

Hi All,

Raising a Credit Note and go one to make payment whic results in Refund and finally make payment to that Credit note which results in supplier balance. I agree.

What will happen to the prepayment amount. Will it stay in the account.

As one of you said to do the above mentioned process along with a dummy invoice to negotialte the prepayment Invoice, will it not bring down the supplier balance twice?

It would be better if some of you can come out accounting entries at each action level for more understanding.

Regards,
Vijay

[hbabhu]

Incorrect URL removed by admin. thanks

[vijayasarathyr]

Hi All,

Here goes the process:
After making the prepayment, to collect the refund and knock of the balance,

1. Navigate to Invoice Workbench (Invoices=>Entry=>Invoice).
2. Create a "Standard" invoice type in the amount of the refund from the
employee.
3. Enter a description that you are retiring the prepayment.
4. Create an invoice distribution for the amount of the refund and debit your cash account by entering the cash account in the account
field.
5. Approve the invoice.
6. Choose the Actions button, select apply/unapply Prepayment Check the box and choose OK.
7. Select the prepayment to which you want to apply the refund.
8. Enter the refund amount to the "Amount to Apply" field.
9. Approve the new prepayment distribution on line.
10. Create a credit memo and take the refund if the money comes in

Accounting Entries are:

Prepayment A/c Dr
To Liability A/c Cr
(Being Prepayment Paid to the Supplier)

Liability A/c Dr
To Cash A/c Cr
(Being Prepayment is paid)

Charge A/c Dr
To Liability A/c Cr
(Being Actual Invoice produced)

Liability A/c Dr
To Prepayment A/c Cr
(Being Prepayment Applied)

Cash A/c Dr
To Liability A/c Cr
(Being a invoice created to knock of the prepayment balance of 2500 as per the example)

Charge A/c Dr
To Liability A/c Cr
(Being Credit Memo created to collect Refund)

Cash A/c Dr
To Liability A/c Cr
(Being Refund collected)

Hope now things are clear. Thanks.

[Upendra]

Thanks Vijayasarathy, One should appreciate your efforts towards solving this problem. But still, please review your last three steps.

When accounting, Standard invoice for amount of refund, you are using Cash Account distribution instead of Charge Account. And, while accepting the Credit Memo, you are using Charge Account. So, your expenses are comedown from the Actuals.

Then in the last step, again you are using Cash Account to accept the Refund through Credit Memo. So, Cash Account is twice debited. Is itn't it?

For this, only small change is enough to rectify the problem. While entering the Standard Invoice for the Amount of Refund expected, you enter actual Charge account which will in turn gets rid off while accepting the Credit Memo.

Now, the Entries will be

Step 1: While entering the STandard Invoice for the Amount of Refund

Charge A/c Dr
Liability A/c. Cr

Step 2: While applying PRepayment to Standard Invoice

Liability A/c. Dr
Prepayment A/c. Cr

Step 3: While entering Credit Memo against the STandard Invoice:

Liability A/c. Dr
Charge A/c. Cr

Step 4: While accepting the refund against Credit Memo

Cash A/c. Dr
Liability A/c. Cr

Now, all the accounts will have zero balances.

Charge A/c. debit in Step 1 is nullified at Step 3. Prepayment is nullified in Step 2. Liability A/c. is nullified in Step 3. Credit Memo is nullified in Step 4.

OK. I believe this clears all others doubt also.

Upendra Donepudi

[Murali]

Hi

Create an Invoice for 2500 and then apply the prepaymen to it and then create a credit memo for the -2500 and receive it through the refund from payment workbench.

[:)]

[quote]Entered a prepayment invoice, validated and create accounting it, made the payment for that for Rs.12,500.00 and create accounting also.

Enterer a std Invoice of Rs.10000, create accounting and apply with the prepayment....

now the Prepayment invoice balance is Rs.2500

Supplier need to return it to us. to receive refund in AP

any one can share their knowledge on this issue...........





<i><div align="right">Originally posted by anu_uma

[oracleapps1983]

Thats very simple When you are returning goods u need to give charge account at distribution level and when it is for prepayment u need to give prepayment account at distribution level. at last prepayment balance will come to zero.