I received an overpayment from one of my customers who does not have an outstanding balance for me to allocate the payment to. This overpayment was never added as a credit to their account, but was paid back to them a month or so later once we had notified them of their error.
Unfortunately we received the overpayment in 2008 accounting period and paid it back to the customer in the 2009 accounting period. How and where do we allocate this overpayment so that our bank statements can be reconciled but we do not incur VAT liabilities?
Many thanks.
Hi Caroline,
The simplest way is to create a 'Customer Overpayment' liability account (click menu File > New > Account, and set the account type to 'Liability'). To record the payment received, create a General Transaction from the Customer Overpayment account to the Cheque Account. To record the payment made to the customer, create a General Transaction from the Cheque Account to the Customer Overpayment account.
Regards,
