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'''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
=============================================================

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

'''Debit ''' '''Credit'''
Expense A/P
{| border=1
|| '''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
{| border=1
|| '''Debit ''' || '''Credit'''
|-
|| A/P || AR-AP Clearing
|-
|}

A/R system:
=============================================================

Make sure the original invoice has been billed:

'''Debit ''' '''Credit'''
A/R Sales
{| border=1
|| '''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
{| border=1
|| 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.

Accounts Payable: Customer Procedure for Contras - Revision history

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