I created a credit note A amounting to $100 for invoice B paid in full earlier, then I receive payment of $500 for invoice c, invoice d and invoice e, each $200, the $100 difference being use of credit note A. how to record it in manager.io?
Split the receipt between the invoices they relate to and reduce the invoice that has a credit note against it to $100.
Thanks for the reply. I guess the amount on split is just arbitrary and is just there to balance the book. Letâs say my client has multiple credit notes, manager.io will apply the earliest first. Is there any way i can find out a list of credit notes not applied yet?
First make sure the credit note has been applied to an invoice.
Then you can View a Customer Statement (Unpaid Invoices) and Copy to > New Receipt.
This will load all remaining balances of invoices less any credit notes.
Still, I have not figured out how sales invoice and credit note work. Please see screen dumps below. I have 3 invoices, the first 2, 1001 and 1002 were paid in a receipt. Then I have credit note against 1001. In another receipt, 1003 was paid with the amount minus credit note against 1001. The sales invoice listing does not seem right.
How should I handle this?
You need to show the edit screenshots for the receipts
The function of a Credit Note is to reduce the balance due of a Sales Invoice. For instance, it is used when a return of goods occurs from the buyer (your customer) to you as the seller, especially if partial payment has already been made on the Sales Invoice you provided to the customer. Due to this return of goods, the receivables from the customer will naturally decrease. This can be recorded using the Credit Note.
Another example is when you need to correct an error in a Sales Invoice or even cancel a Sales Invoice that has been issued when the transaction is canceled. Instead of deleting the Sales Invoice, to maintain the continuity of invoice numbering or to avoid erasing recorded activities, the correction of the Sales Invoice is carried out using a Credit Note.
In essence, the Credit Note is used to reduce the amount due on the issued Sales Invoice.
Suppose you issued three Sales Invoices, numbered 1001, 1002, and 1003. Then, for one of the Sales Invoices, for instance, the one numbered 1001, you have to do a correction for the billed amount. Initially, you issued a Sales Invoice with a billing amount of 500.00, but due to a correction, perhaps because of an error or a return of goods sold amounting to 100.00, you create a Credit Note for the Sales Invoice numbered 1001. If there are two Sales Invoices that require correction, you must issue two separate Credit Notes, each referencing its respective Sales Invoice.
Based on the screenshot you provided, there are two Receipts you created. The first Receipt is 300.00, and the second Receipt is 350.00, making a total of 650.00. Previously, you had issued three invoices. Invoice 1001 amounted to 100.00, Invoice 1002 to 200.00, and Invoice 1003 to 400.00, totaling 700.00. Therefore, the amount to be reduced from the total invoices previously issued is 50.00. Thus, the total amount of the receivables will be 650.00, reflecting the payment you have received from your customer.
First, you need to identify which Sales Invoice you will reduce. Whether it is Invoice 1001, 1002, or 1003. Is the deduction applied to just one Sales Invoice, two Sales Invoices, or even all three? Ensure the amount to be reduced is 50.00. If only one Sales Invoice is to be reduced, create one Credit Note against one of the Sales Invoices for the amount of 50.00. If two Sales Invoices need to be reduced, create two Credit Notes, and if all three, create three Credit Notes. Each should be such that the total does not exceed 50.00 and is targeted at their respective Sales Invoices. Because when you create a Credit Note, you must select which Customer and which Sales Invoice you will give the credit.
Assume that only the amount of Sales Invoice 1001 that will be reduced. Thus, the balance due for Sales Invoice 1001, which was initially 100.00, is now 50.00 after credited by the Credit Note you created.
You can see that before the Receipt was created, the Balance Due for Sales Invoice 1001 will be 50.00 because it had previously been reduced by the Credit Note issued.
Please disregard the Overdue status in the screenshot above, as the Sales Invoice I created here does not have a due date. Therefore, when I generated these Sales Invoices today, their status automatically appeared as overdue.
Upon clicking the View button for Sales Invoice 1001, it becomes apparent that the invoice amount of 100.00 has been reduced by a Credit Note of 50.00, leaving 50.00 as balance due.
Consequently, when you create the first Receipt totaling 300.00, it will affect the three Sales Invoices you have issued. Therefore, you must create three lines in the table when making the Receipt. The details are as follows:
-
For the first line, direct it to the accounts receivable, select the customerâs name, and choose Sales Invoice 1001. Since Invoice 1001 has already been adjusted by a Credit Note, the amount due is now 50.00. Thus, the amount received in the first line is 50.00.
-
For the second line, direct it to the accounts receivable, select the customerâs name, and choose Sales Invoice 1002. Since the amount due for Sales Invoice 1002 is 200.00 and there are no adjustments with a Credit Note, the amount received in the second line remains 200.00.
-
For the third line, direct it to the accounts receivable, select the customerâs name, and choose Sales Invoice 1003. Since 50.00 + 200.00 = 250.00 has already been received in the first and second lines, the amount to be recorded for Sales Invoice 1003 is 50.00. Thus, the total receipt is 300.00.
As a result, Sales Invoice 1003 will have an unpaid balance of 350.00.
Subsequently, for the second Receipt, you receive 350.00. This is straightforward, as the amount received matches the outstanding balance on Sales Invoice 1003. You simply need to create a second Receipt directed to Sales Invoice 1003 with the same amount, 350.00.
With this, all the Sales Invoices you issued are fully paid. There should no longer be any Sales Invoices with the status âOverpaidâ or 'Coming due`.
Below is the final status of the Sales Invoices, Credit Notes, Receipt, and Customers list.
I hope the explanation is easy to understand. Apologies if it is too lengthy. I tried to explain the matter as thoroughly as possible so that the sequence becomes distinctly apparent.
Additionally, which should be prioritized between creating a Receipt or a Credit Note? The answer depends on which occurs first (in terms of the date of the payment receipt transaction or the reduction of the amount billed on the Sales Invoice).
If the payment received occurs first, then record the payment received initially on the Receipt. Subsequently, if there is a correction to the amount billed on the Sales Invoice, then create the Credit Note. Conversely, if the correction to the amount billed on the Sales Invoice occurs first, create the Credit Note first, even if the payment from the customer has not yet been received. Thus, the sequence of transactions will follow the chronological order of their occurrence.
Although it is not problematic which is done first, as the Manager will always arrange the chronology according to the date, to avoid confusion like the one you experienced, or errors in reducing the amount billed on the Sales Invoice, it is better to record or document according to which occurs first.
We often forget, with the presence of accounting applications like Manager, that the fundamental principles of bookkeeping within an accounting cycle, which begins with recording daily business transactions in chronological order through journaling activities. Applications like Manager, which assist us in bypassing these traditional steps with dual posting capabilities by recording a single transaction, make us too comfortable and forgetful of the core principles of accounting itself. Therefore, as a refreshment, let us remind each other that the chronological order of transactions in accounting is crucial. Keep up the spirit, all you great accountants who strive to implement and understand Accounting Information Systems and use applications like Manager. Cheers 
@anatawiranata THANK YOU for the detail illustration. I got it now.
Youâre welcome Brother. I hope it truly assists you.
@anatawiranata Letâs say the sales invoice involving the credit note was paid in last FY, what would be the easiest way to handle this when I receive payment in this FY with the credit note amount deduced?
Thatâs not clear
You say âthe sales invoice was paid last financial yearâ and then âwhen I receive payment in this Financial yearâ
Both of those statements canât be true
Do you mean that the Sales Invoice paid last year is still not fully settled and there remains an outstanding balance? Because you mentioned that this year you received another payment. Is this payment for the same invoice from last year that you said was already paid? Or is it something else? Like @Joe91, I am also a bit confused about your question. Could you please explain the situation in more detail?
Sorry for the confusion. Letâs use previous example, the second payment $350, with the credit note amount $50 deduced happens in this FY and the first payment happened last FY. I cannot go back to adjust last year payment like you suggested. So, thatâs where I stuck.
In general, how to handle Starting Balance for Customer with Credit Note?
If based on the previous illustration, the amount billed for Sales Invoice 1 is $100, for Sales Invoice 2 is $200, and for Sales Invoice 3 is $400. Is that correct?
Then, according to the information you provided, last year you received $300 from the customer. If the total of the three Sales Invoices is as illustrated, then the $300 you received should settle or pay off the first Sales Invoice, right? Because the amount billed on Sales Invoice 1 is $100. Then, the remaining $200 should also settle Sales Invoice 2, as the amount billed on this Sales Invoice is also $200. This means that the two Sales Invoices you created should not be tampered with anymore. Ideally, both of these Sales Invoices should have been settled by a payment of $300 from your customer.
Now, for the payment you received this year amounting to $350, while Sales Invoice 3 has an amount billed of $400. This means that the correction with a Credit Note should only address Sales Invoice 3. Because the only one that remains unresolved or unpaid is Sales Invoice 3.
The previous illustration I provided when the Credit Note was credited to Sales Invoice 1 was just an example. If indeed the correction made is for Sales Invoice 1. Essentially, you must first identify which Sales Invoice the creation of the Credit Note will correct. And of course, the one being corrected is the Sales Invoice that is indeed not fully paid. Why would we correct a Sales Invoice that has already been fully paid, right? Unless you are issuing a refund for the payment, then you must make a correction. If not, a fully paid Sales Invoice should not be disturbed. Especially a Sales Invoice that was settled last year.
In conclusion regarding this matter, you must first identify the basis of the Credit Note. Is it due to the return of goods you have already sold and delivered to your customer? Then, which Sales Invoice needs to be corrected? Another important aspect to consider is when dealing with returned goods. When issuing a Credit Note, it is important to clearly and accurately record the quantity of goods returned and their prices. In the context of sales of goods, the creation of a Sales Invoice will invariably reduce inventory, increase customer receivables, and increase the revenue. Then, when issuing a Credit Note, it will not only adjust the billing amount from the Sales Invoice and reduce customer receivables, but also return the quantity of goods to your inventory.
Could you elaborate further on what you mean by âStarting Balance for Customerâ? As far as I understand, in accounting, the term Starting Balance is used when we do the process of transferring balances from the previous period to the current period, particularly for accounts on the Balance Sheet. For accounts on the Income Statement, each period is reset to zero. However, this applies if we are conducting bookkeeping using traditional accounting with manual steps from daily journaling, posting to the ledger, creating a trial balance, making adjustment entries, creating an adjusted trial balance, to preparing financial statements such as the balance sheet, income statement, and so on.
In Manager, however, these steps are automated. For instance, creating a Sales Invoice will automatically record the transaction as revenue in the Revenue account on the Credit side and will automatically record receivables in the Receivables account on the Debit side. The ledger is automatically posted without you having to manually make entries for posting to the ledger.
In traditional accounting, you have to record it with daily journaling manually. The principle is the same, after identifying the sales transaction, you will record credits and debits in the appropriate accounts. But it doesnât end there, you also have to post it to the ledger manually to know whether the balance of each account is correct.
So, what exactly do you mean by the starting balance for the customer in this question?
Letâs say I use Manager starting from the year 2025 and I have customers with credit note that they can use to offset sales invoices payment. The screen dump below showing sales invoice 1001, its credit note and receipt is simply there to illustrate the date sequence. From your previous solution, I can adjust the first receipt but as the credit note is there even before I use Manager, how do I record it properly?
Again, I truly appreciate your input and guidance.
Dear forum members,
I figured it out. Manager.io will handle it automatically. I should create Credit Note as usual and simply deduct that credit note amount from any of the invoices in the payment I receive from that customer. Thank you all again.