Credit Note Allocation


I have read through some of the related threads on the forum, but I am still unsure what to do in my case. Below is an outline of my problem.

I deal with some Big Companies that have several branches. BigCompany_BranchA, BigCompany_BranchB, BigCompany_BranchC etc. I have created accounts for each branch and BigCompany_Accounts_Payable pays all of the invoices for each branch.

Some while ago I sold some products to BigCompany_BranchA and they were subsequently paid for. For some reason BigCompany_BranchA stopped selling my products and wanted to return the surplus inventory they had on hand. As I do good business with BigCompany, this did not seem to be an issue for me, so I did a return and issued a credit note to BigCompany_BranchA. There account is now in credit to this amount.

BigCompany_Accounts_Payable have now paid other invoices from other branches and deducted the credit note value of BigCompany_BranchA from their remittance.

How can I allocate the value of the credit note across invoices from some of the other branches and also reduce the balance of BigCompany_BranchA account to zero ?

I am not from an accounting background so would greatly appreciate verbose and simple answers if possible.

Many Thanks

You create a Zero valued receipt addressed to BigCompanyB or C.
In the payer field, select Other since the receipt will contain multiple accounts and Type in the name of the paying branch.

The lines should be:

  1. accounts receivable >> Customer = BranchB or C >> for X amount
  2. accounts receivable >> Customer = BranchA >> for -X amount

That’s one method to do it, however, there are other methods that involve clearing accounts.
Alternatively, you can collect from BranchB and BranchC and pay BranchA and avoid complexity in your books.


The last line of your reply makes the most sense to me.
Thank you very much for your pearls of wisdom.