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Apply advance payment to an existing sales invoice

Hello community,

We are currently migrating from Oracle Netsuite, so bare with me.

I would like to allocate an advance payment (recorded via Payment entry against a Sales order) with a submitted invoice. Payment Reconciliation tool is to be used for this purpose.

Now here is the problem - the advanced payment should be booked against a different balance sheet account than the sales invoice. Sales invoice is booked as debit - Account receivable. However, the advance payment from is treated as a liability of the business, see this very good explanation:

Payment Reconciliation tool requires one receivable/payable account:

But sales invoice is booked to a different account:

Therefore, is there a way to match the records?
Thank you.

Hi Marek,

Technically you are right an advance paid by a customer is a liability. We treat that on ERPNext as a negative asset.

You can try setting an account as Receivable in the Account DocType, but in the chart of accounts, you can place it under Liabilities. That should address your issue, right?

But here’s my question: An advance till it stays as an advance is a Liability, right! But the moment you knock it off against a Sales Invoice it no longer is a Liability. It moves to the Income account, right? So, are you stressing out over something that you don’t need to stress out about?

Or maybe I’m missing something.

Hope this helps.

Thanks

Jay

Hi Jay,

That is the problem: liability IS NOT negative asset and would be considered as error during financial audit. Should that amount be substantial (e.g. for a company that has a lot of customer prepayments), it would be reported rather harshly. I used to work as a controller for almost 10 years and worked with major companies in the field, pwc, KPMG, Deloitte…

The account setting can be made “Receivable” and at the same time have Root Type set to “Liability”.

However, the problem is that the advance payment and invoice - receivable must be on the same account to be matched. That is where things go wrong.

I really like ERPNext, coming from Oracle Netsuite and SAP before Netsuite. However, accounting aspect needs some polishing, happy to help.