All 23 Cash Application questions
More in Cash Application
How do you handle a short payment or overpayment during cash application? What are customer deductions (chargebacks) and how are they managed? What is a lockbox and how does it help cash application? How are returned/NSF customer payments handled after they were applied? How are bank fees and card-processing fees on receipts accounted for? What is a suspense account and how is it used in cash application? What is straight-through cash application and what blocks it? How does cash application affect the accuracy of collections activity? How are early-payment (settlement) discounts taken by customers recorded? How do you apply a single payment across multiple invoices with partial amounts and deductions?
Advertisement
Back to results for “Cash Application”
Accounts Payable & Receivable › Cash Application

How is customer credit balance or prepayment handled in AR?

Intermediate

Answer

A customer credit balance arises from overpayment, a credit note, or a prepayment. It's held on the account (a credit in AR or a contract/deferred liability for prepayments) and applied against future invoices or refunded. It must be monitored so credits aren't forgotten and, where required, escheated under unclaimed-property rules.
Real-world example A customer's $500 overpayment is held as an account credit and netted against their next invoice.

Common follow-ups: When must a credit be refunded vs applied? | What is escheatment of old credits?

Reconciliations Collections & Bad Debts Cash Application
All 23 Cash Application questions