Accounts Payable: Customer Procedure for Contras

The A/R A/P Contra

Before proceding: You will need an account for the A/P A/R Contra Clearing. This is a balance sheet "wash" account. When all parts of this transaction are complete, this account should return to a zero balance.

IN the A/R system - Create an Allowance code for Contra - using the A/P A/R Contra Clearing account.

A/P System

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Voucher the original Invoice from Vendor: Voucher full invoice amount to appropriate expense accounts.

Debit Credit Expense A/P

Debit	Credit
Expense	A/P

Voucher a negative invoice for the amount of the Contra (the amount to write off of the A/R invoice) Distribute this amount to the A/P A/R Clearing account.

Debit Credit A/P AR-AP Clearing

Debit	Credit
A/P	AR-AP Clearing

A/R system:

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Make sure the original invoice has been billed:

Debit Credit A/R Sales

Debit	Credit
A/R	Sales

In Cash posting, post an allowance for the contra amount toward the invoice. Use the Contra Allowance code.

Debit Credit AR-AP Clearing A/P

Debit	Credit
AR-AP Clearing	A/P

Example 1: Contra where the A/R invoice is greater than the A/P Invoice.

Original Invoice:

A/R Invoice: $2500 A/P INvoice: $2000

Assuming the A/P invoice is vouchered, and the A/R invoice has been billed.

In A/P system:

• In Hand Written Checks: Enter vendor ID, Select Original Invoice and set check amount to $-2000.
• Voucher a new invoice for $-2000, Set Check amount to $-2000. Distribute to the A/P A/R Contra Clearing Account.

In A/R system:

• In cash posting, apply an allowance to the invoice(s) using the Contra Allowance Code.