A client is using the Sales on Account workflow. Instead of receiving a payment against the invoice, they add a new deposit categorized to an income account. What 2 problems will this cause?

Question

Benton

Business

16 March, 06:58

A client is using the Sales on Account workflow. Instead of receiving a payment against the invoice, they add a new deposit categorized to an income account. What 2 problems will this cause?

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Answers (1)

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Aracely Hahn · Answer 1

It will cause a major problem in case the client adds new deposit to an income account instead of receiving a payment.

Explanation:

Account receivables are the record of the invoices for which the client has not made payment yet. If the client adds a new deposit categorized to an income account instead of receiving a payment against the invoice, the first major problem would be that the Accounts Receivable balance of the client will not be accurate. It will create duplicate expenses as there was an entry made for a new deposit.

The second problem will be as a result of the first one that, the income account will show duplicate income and correct the correct income will not be recorded.