Pre-need Credit Note Where Items Have Been Redeemed – Review General Ledger Entries
Where a user raises a credit note and some items have been redeemed, a warning message will display advising some items associated to the original invoice have been redeemed.
We suggest that the user liaises with the finance team prior to proceeding to ensure the general ledger postings are reviewed before processing the credit note to ensure the appropriate transactions are processed to reset the general ledger accurately.
Where an item has been redeemed and revenue has been recognised, raising a credit note against the pre-need invoice will process the transaction back against unearned income.
The redemption of the item from the original invoice will mean revenue has been recognised (along with the associated transactions against COGS if this was an ROI item).
If the general ledger batch has been posted in Sage 300, a journal to reverse the general ledger transactions to ensure revenue and unearned income (and associated capital and cost of good sold accounts) are brought back into line.
In this example, we will focus on the chapel use line that has been redeemed, to trace the steps to conduct the appropriate checks of the general ledger.
Revenue has been recognised and credited to the chapel use account and the unearned income account has been debited.
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In this example, a package with multiple components were sold pre-need, however, we will focus on the chapel item of $236.36.
a. DR Accounts Receivable
b. CR Unearned Income
2. Item Redeemed
a. DR Unearned Income
b. CR Revenue
3. Credit Note Raised
a. DR Unearned Income
b. CR Accounts Receivable
4. Journal Entry Required
a. As can be seen from the above transactions, the general ledger is left with an amount in the revenue account that has been recognised and should not have been and the corresponding amount remains in the unearned income account awaiting redemption that is no longer required.
b. These accounts will need to be journaled against each other to reset the general ledger so nil revenue is recognised and nil amount remains in the unearned income account.
We suggest a
note is placed on the location and person record indicating a credit note has been applied to explain the transactions that have taken place.
