Making Credit (Reversing) Entries

Making credit entries in the accounting system is a simple, intuitive process. Credit entries can be made in the Accounts Payable, Accounts Receivable, and General Ledger modules.

By definition, a credit entry is the reverse of the original entry.

In the case of an Accounts Payable Subcontract or Retention invoice for $1,000.00, the credit entry is an AP invoice for -$1,000.00. If the invoice was charged to a job and cost code, the number of units may also be credited (i.e. -45 Square Feet).

In the case of an Accounts Payable Trade Invoice for $1,000.00, the credit entry is an AP invoice for -$1,000.00. If the invoice was charged to a job and cost code, the number of units may also be credited (i.e. -45 Square Feet). If entering a line item on a Trade Invoice, put a negative quantity and a positive amount. For example: quantity = -1, amount = $1,000.00.

The net effect of putting a credit entry into the system is that an opposite transaction will be sent to all areas affected by the original posting. In the case of our $1,000.00 invoice, the original posting sent a credit to the Accounts Payable GL account and a debit to the Jobs in Progress - Materials GL account. It also created a $1,000.00 invoice in the AP History file and added $1,000.00 to the cost to-date for the appropriate cost code in the Job Cost file.

When posting a credit entry, the system does not remove the original transactions from the respective files, but adds transactions which offset the first. In the case of our -$1,000.00 invoice, the system sends a debit to the Accounts Payable GL account and a credit to the Jobs in Progress - Materials GL account. It also creates a -$1,000.00 invoice in the AP History File and subtracts $1,000.00 from the cost to-date for the appropriate cost code in the Job Cost file.

It is important to understand this concept. Placing offsetting entries into the respective data files fixes the problem and leaves behind an easy to follow audit trail in the process.