This procedure allows you to offset the amount owed to a company (AP invoices) with the amount due from the company (AR invoices) when the company has been set up as both a vendor and a customer. The amount that may be cross-applied may not exceed the smaller of the total of the open AP or open AR invoices for the company. A special purpose GL account should be set up and used for counter balancing or clearing the amounts that are applied.
• Set up a special purpose GL account that will be used exclusively for cross application of invoices. The account should always have a zero balance except when invoices are actually being applied to each other. The account description should indicate the purpose of the account (for example AP-AR Cross Apply Account). Please see the General Ledger documentation for instructions on setting up a new general ledger account.
• Print an Open Accounts Payable report for the vendor whose invoices are to be cross applied. The report will list the individual invoices and the total amount due to the vendor.
• Print an Accounts Receivable Aging for the customer whose invoices are to be cross applied. This report will show the individual invoices and the total amount that is owed to you by the customer.
• The maximum amount that may be cross applied is the smaller of the open AP balance or open AR balance for the company. Determine which AP and AR invoices and amounts will be applied and note the invoice numbers and amounts on the appropriate reports.
• Select the AR Invoice Adjustment program from the menu and use the program to charge each the AR invoice amounts that are to be cross applied to the special purpose GL account that was set up in the first step above. If you are charging off accounts receivable invoices which have a positive balance, the adjustments will create a journal entry that will decrease (credit) the Accounts Receivable GL account and debit the special purpose GL account. If you are charging off accounts receivable invoices which have a negative balance, the adjustments will create a journal entry that will increase (debit) the Accounts Receivable GL account and credit the special purpose GL account.
• Select the AP Invoice Entry program from the menu, select the appropriate vendor record and use the program to create an accounts payable credit memo to offset the amount of AR invoices that were charged off. The credit memo amount should be preceded by a negative sign. The credit memo should be applied (charged to) the same account that the AR adjustments were applied to. When the credit memo is saved, it will create a journal entry which decreases (debits) the Accounts Payable GL account and credits the special purpose GL account.
• Verify that the special purpose GL account balance is zero. Once the accounts payable credit has been posted, the balance in the special purpose GL account should be zero. If the special purpose account balance is not zero then the account did not have a zero balance at the beginning of the procedure or the AR and AP amounts which were charged to the account are not equal. If the special purpose account does not have a zero balance at this point, you should use the GL Account Lookup program to view the entries which were made into the account and confirm that the AR and AP invoices charged to the account are equal. If they are not you should determine the totals which were posted from both AR and AP and use the AR Invoice Adjustment program or the Accounts Payable Invoice Entry program to correct the postings.
• Once the AR invoices amounts have been adjusted, and the AP credit memo has been created, use the GL Account Lookup screen to verify that the special purpose GL account balance is zero. If the account does not have a zero balance the operator should recheck the amount of the AP and AR adjustments and make sure that they are equal.
• Apply the accounts payable credit memo if desired.