How to adjust negative AR in Balance Sheet?

I have a case like this:

  • My customer paid upfront before I made SO, DN, SI (e.g 27 Oct).
  • I booked this payment with Payment Entry of type Received:
    • Account Paid From: AR
    • Account Paid To: Cash
  • When I see the Balance Sheet, the Account Receivable is negative.

My understanding is this caused by using PE so the system thinks there iss invoice to pay. And since there is no invoice, it books negative number to AR.

I then tried to adjust this transaction using JE to:

  • Acct Receivable (Credit)
  • Acct Payable (Debit)

But the JE can’t take AP with Party Type Customer.

What is the best practice to book a prepayment like this (accounting-wise and erpnext-wise)?
Thank you

My solution to this problem:

  • In my CoA I have Advance Payment Account in Liabilities root.
  • I change the account type to Receivables (so I can select it in the PE later)
  • Use this account when receiving payment (without SO, SI) in Payment Entry Receiving.
  • Later when creating SI, I use button Get Advance Received to fill the child table and allocate the amount to match the sold/delivered items.

My questions then:

  • Why ERPNExt doesn’t use Liabilities account for Receivables of this kind (which is actually a payables) that is automatically created by Payment Entry or Sales Invoice?
  • Better yet, why ERPNext doesn’t have Account Type Advance Payment for this kind of transactions?
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Thanks for the solution! I am able to credit the advance payment to the Advance Payment Account in liabilities.

Now I have a question, if the advance payment only covered 10% of the SI total amount, when I submit the SI, 90% (unpaid) of the total amount will debit the Advance Payment Account as well and this caused the account become negative in the balance sheet. I suppose the right way should be debiting the Account Receivable. How do you handle it in this case? Thanks.

I think I have not had cases like this. If I have time I will look at the account and try something. But don’t hold your breath please… :slight_smile: