Every now and then it may happen that you make a sale as selling to your customers \u2013 i.e. wrong prices, wrong items etc. Like your suppliers make such mistakes, so can you.<\/p>\n
When such a situation arises, what you do is credit your sales and send a credit invoice to your customer. Your accounting entry is as follows:<\/p>\n
Db Sales revenue<\/p>\n
Cr Account receivables<\/p>\n
Note how you don\u2019t account for an expense but you decrease your sales revenue. Alongside with taking a bit off from your revenue, you also decrease the balance sheet item, receivable balance.\u00a0<\/p>\n
As for the period you recognize the credit, it\u2019s to be done within the period when you first realized it needs to be done, i.e. when your client informed you of the mistake. You don\u2019t go back and start restating the prior period statements for that.<\/p>\n
Something you should consider however already in your contractual agreements is the period of time your client is allowed to make such requests, to get credit invoices. Arguably there\u2019s a time period that\u2019s okay to say that the shipment was wrong or the prices were not right, but after this reasonable amount of time has elapsed, is the client still allowed to make complaints? Food for thought.<\/p>\n","protected":false},"excerpt":{"rendered":"
Every now and then it may happen that you make a sale as selling to your customers \u2013 i.e. wrong prices, wrong items etc. Like your suppliers make such mistakes, so can you. When such a situation arises, what you do is credit your sales and send a credit invoice to your customer. Your accounting […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25,39],"tags":[],"class_list":["post-4576","post","type-post","status-publish","format-standard","hentry","category-1-basic-accounting","category-1-11-revenue"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4576","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=4576"}],"version-history":[{"count":1,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4576\/revisions"}],"predecessor-version":[{"id":4577,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/4576\/revisions\/4577"}],"wp:attachment":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=4576"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=4576"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=4576"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}