Tip #247 – Understanding the A/R Module – Part 2


Tip #247
Understanding the A/R Module – Part 2

ON ACCOUNT Transactions

Orders with an ON ACCOUNT method of payment, payments on account and finance/rebilling charges all generate records that is kept in a “transactions” file. Cash orders do not generate records in this file.

When an order with an ON ACCOUNT method of payment is created, in addition to a record being created in the “transactions” file, another record is created in the “aging open invoices” file.
These are the records of outstanding charges you see when you apply a payment on account. In addition, the customer’s profile record is updated by increasing the total of the purchases made.

So if this is the first order that I place with you is for a total of $100.00 and the method of payment is ON ACCOUNT, there will be 1 record in the “transactions” file for the total of the invoice, 1 record in the “aging open invoices” file for the total of the invoice and my customer’s profile record will show that I’ve made 1 purchase for $100.00.

We have 3 different places that will show that I have a $100.00 balance and the account will be in balance.

Now I send in a payment for $50.00.

A record is added in the transactions file for the total of the payment ($50.00), the record in the “open charges” record balance is reduced by the amount of the payment and will now show a $50.00 balance and the customer’s profile record will get updated to show that $50.00 payment. When you compare those 3 balances, they should all show $50.00 and the account will still be in balance.

Here are some pictures to help you visualize it…


Above is the way a brand new account should look.


I place my first order for $100.00 with an ON ACCOUNT method of payment.


My customer’s profile record now looks like this.


There will be one record in the “transactions” file showing my $100.00 purchase.

There will also be a record in the “aging open invoices” file showing the balance of my $100.00 purchase.

As you can see all 3 balances match, so if I audit my account this is what I get…


Now, I’m going to send you a payment for $50.00









As you can see, my account is still in balance because all 3 balances add up to $50.00.

If I now send you another payment for $50.00, all 3 balances should add up to $0.00. The only difference is that the “aging invoice” record gets deleted because it is no longer needed.

But let’s see what happens if I send you a payment for $75.00 when I only owe you $50.00.




The overpayment is recorded and now my account will look like this…




Again, the account is in balance because all 3 balances add up to $ -25.00.

More later…

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