15 Sep 2009, ABC Pte Ltd sends you a cheque of $950.00 for the payment of invoice 1001. Customer deducted the $50.00 off as a discount you had agreed earlier. However, your Accounts Assistant had entered it as $1,000.00 (full payment).
20 Oct 2009, your Accounts Assistant created a Credit Note $50.00 for ABC Pte Ltd.
31 Dec 2009, accounts closed. Nobody spots the mistake. Accountant did not do any Bank Reconciliation in QuickBooks.
10 Apr 2010, Accountant spots the mistake.
If you are the Accountant, what will you do to adjust these transactions?
Since this account had already closed, you should not go back and edit the transaction (that is 15 Sep 2009, Receive Payment), unless your Auditor allows (In most cases, the adjustment will be done via an Audit Adjustment). However, if your adjustment were to make in this financial year, below are the steps you can do to resolve your issue.
The Bank account overstated by $50.00; you should pass a journal to revert it back to $950.00 instead of reflecting as $1,000.00. The Accounts Receivable account understated by $50.00, you need to debit back $50.00 to balance up the account. Therefore, the General Journal entry (dated 10 Apr 2010) should be debiting Accounts Receivable account $50.00 and crediting Bank account $50.00.
Now, your Bank account balance is $950.00, which is correctly stated. Besides, your Accounts Receivable account is also correctly stated, zero balance.
Although your Accounts Receivable account is zero balance, the debit journal (dated 10 Apr 2010) and credit note (dated 20 Sep 2009) are still shows in the Accounts Receivable Ageing report. You need to do a Receive Payment (physical receive $0.00 amount) to offset the Credit Note with the Debit Journal.