Prepayment Refund

[shaikjohnpasha]

How to receive refund of Prepayment.
Advance paid to an employee/Supplier.
Now ,refund of prepayment has to be received.
How this works out in AP.

[ebserp]

hi shaikjohnpasha

Refund of a Prepayment or Advance
You can record a refund from a supplier that pays back an unused prepayment or part of a prepayment. When you do this, Payables reverses the prepayment so that it is no longer outstanding and so that you can no longer apply the prepayment to an invoice. The net effect is a debit to your cash (asset) account in the amount of the refund and a credit to the prepayment account in the amount of the refund.
You can use exactly the same method to record a refund from an employee for an advance.


Prerequisites
You have entered and paid a prepayment or advance.

The supplier or employee has refunded the unused portion of the prepayment.

If the supplier or employee has not refunded the entire prepayment, apply the appropriate amount of the prepayment to an invoice or expense report.

To record a prepayment refund:
1. In the Invoices window, enter an invoice in the amount of the refund from the supplier. Enter Standard for the type. Enter a description on the invoice to indicate that you are retiring a prepayment. Create an invoice distribution for the amount of the refund and debit your Cash account or an accounts receivable account. Credit the accounts payable liability account as always.
Approve the invoice.

2. Choose the Actions button to navigate to the Invoice Actions window. Select the Apply/Unapply Prepayment check box and choose OK.
Select the prepayment to which you want to apply the refund. Enter the refund amount in the Amount To Apply field. Optionally change the GL Date, which is the accounting date for the reversing prepayment distributions that Payables creates when you apply a prepayment. If you want to see more information on a prepayment, select it and choose the Invoice Overview button.

If you want to approve the new prepayment distributions that the application will create and the Allow Online Approval Payables option is enabled, select Approve. If the Allow Online Approval Payables option is not enabled, you can submit Payables Approval from the Submit Request window.

If you want to print a Prepayment Remittance Advice for the supplier, select Print.

3. Choose the Apply/Unapply button to apply the prepayment amount to the invoice you entered for the refund and to save your work.
This fully retires the prepayment and reduces the amount remaining on the invoice to 0. Payables automatically enters a reversing distribution on the prepayment to credit the prepayment account. This credit balances the debit you entered on the invoice (Step 1) to the Cash account.

[shaikjohnpasha]

Thank you ebserp!!!

Is there any other alternative solution.
I would prefer to take the refund by applying the Debit/Cedit Memo sothat I would be able to clear the payment in Cash Management.But inthis case,my prepayment invoice still shows the status 'Available'(Open).

Any other solution/workaround to meet this req.

[AmanKhan]

Follow these steps:

1. Enter Standard invoice as mentioned above
2. Apply prepayment to invoice and prepayment will be fully applied.
3. Enter Debit memo & record refund.

Regards,

[shaikjohnpasha]

Dear Aman,
Pls let me know the accouts to be selected for the standard invoice and Debit memo.

I appreciate your quick reply!!

Thanks in Advance!!

[shaikjohnpasha]

Can you please anyone suggest me.

Thanks in Advance!!

[AmanKhan]

For Standard invoice use Cash/bank account in distribution (the account used for payment of prepayment invoice)
Apply prepayment & accounting will be reversed. All account balances will be zero

For Debit memo: use same Payables to supplier account in Debit & credit so Debit cancel out with credit
Record refund against Debit memo, Final Entry will be:
Dr. Bank
Cr. AP

I hope this workaround will be feasible for you. Let me know if u have question

Regards,

[jeffreyszz]

This is great

how the AP Debit and credit generate from other module ?
or only manully input ?

Thanks

[AmanKhan]

Plz explain your requirement ?

[guhanadh]

Hi Shaik,

When you Create a Prepayment the following entry will be Created:

Prepayment A/c Dr.
To Liability A/c

After Payment of Prepayment Invoice

Liability A/c Dr.
To Cash A/c

For Refund

Create a Standard Invoice with following Account in Distribution

Bank A/c Dr.
To Liability A/c

When Matched this Invoice to Prepayment

Liability A/c Dr.
To Prepayment A/c

Impact of this Process: Supplier Balance will come to Zero. Prepayment will get nullified and Standard Invoice will come 0. Bank Bank will get updated.

Same Process can be adopted to Partial Prepayment Refund also.

Please Correct if any thing is required.

Hope it is Clear and Transparent...

[udaya]

Hi gouse,
Follow these steps for refund

1)Prepayment invoice---->liability A/C--Cr
Asset account(AdvanceA/c)--Dr

Payment------------->liability A/C--Dr
Cash/Bank A/C---Cr
Finally the accounting is cash---Cr and Adv A/c---Dr

Here adavnce(say 5000/-) is in Advance A/c when the supplier/Employee submits account for this advance for 2000/- then the remaining 3000/- should be refunded

NOW apply the Expense report submitted by the employee to the prepayment(2000/-)then the advance A/c will be credited for 2000/- and remained with 3000/-

2)Raise astandard invoice with the accounting as below--

Liability A/C--Cr
Any Clearing A/c--Dr for 3000/- and apply to prepayment then the adv A/c is "0" and that amount is transferred to "Clearing A/c" now u have to take it to "cash".

3)Raise A CREDIT MEMO with same accounting

Liability A/C--Cr
Any Clearing A/c--Dr for -3000/-(negative value)

Make the payment for this credit memo(refund) now check the accounting.....Clearing A/C is "0" and cash debited with 3000/-....i hope this will help you....

[chandravarisetti]

I have observed in the above reply, for debit/credit memo liability is debited and expense/charge etc.. is credited whereas you said as below.

3)Raise A CREDIT MEMO with same accounting

Liability A/C--Cr
Any Clearing A/c--Dr for -3000/-(negative value)

[amicguys]

Assume that an employee is travelling on Duty, hence the company has paid him some advance to meet hi daily requirements. He was paid an advance of Rs.1000 /- as prepayment

Prepayment Invoice
Dr. Prepaid Expense A/c 1000
Cr. AP Liability
1000
Payment against Prepayment
Dr. AP liability 1000
CR. Cash account 1000

Employee came back from his travel and met an expense of Rs.800, now he has to refund an amount of Rs. 200/- to the company.

Step 1:
Let us create and apply the available prepayment against Employee expense report

At the time of Expense report Invoice:
Dr. Expense Account 800
Cr. AP liability 800

Post apply of Prepayment against Expense Report
Dr. AP liability A/c 800
Cr. Prepaid Expense A/c 800

So the final entry will be as below, as we are offsetting the Liability account
Dr. Expense Account 800
Cr. Prepaid Expenses 800

Step 2:
The company has to receive the remaining Rs.200 /- from employee, however before we create a refund we must off-set the prepayment at Sub-ledger level (AP)

So create a standard Invoice
Dr. Prepaid Expense 200
Cr. AP Liability 200

Apply the remaining prepayment against the invoice
DR. AP liability 200
Cr. Cash account 200

By doing the above activity we have off-set the prepayment invoice to ZERO at AP.

Step 3:
Create a refund with type as Credit memo to update the Company Cash/ Bank balance

Dr. AP Liability 200
Cr. Prepaid expense 200

Perform Refund
Dr. Cash account 200
Cr. AP liability 200

By debiting the cash @ refund it updates the cash balance by Rs. 200/-


Hope this has clarified you.


Thanks,
Vijay Kishore.K

[ratna]

[^] hi vijay

nice job ut i have small doubt in step 3.

after creating standerd invoice we have to go for debit memo or credit memo. please....


thanks.