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.