Problem: An owner of the entity paid a supplier directly on behalf of the company. This creates the need to reconcile the Supplier Payable Account with the Shareholder’s Account, as the payment represents a contribution by the owner.
Solution: To properly record this, utilize the Mutual Settlement and Other Income documents, ensuring the supplier liability is cleared and the shareholder’s contribution is recognized under Capital Issued.
1. Write off Payable Balance
To write off a payable balance, create a Mutual Settlement document using the Supplier Debt Adjustment transaction type, and specify the appropriate Income GL account in the Account field.
At the Accounts Payable tab, choose the payable document related to this supplier (use the Pick option to select from the list of outstanding invoices)
Once all details are filled, post the document. The document will create the following transaction:
Dr Current Trade Payables
Cr Other Operating Income
2. Other Income Document
Create an Other Income document using the transaction type Reversal to offset the income against the Shareholder’s account.
In the Income tab, record the Shareholder’s Contribution on the credit side. Select the Shareholder’s Account under the Capital Issued section of the Balance Sheet. Verify that the Shareholder is set up as a company in the accounting system. Assign the correct contract dimension to the Shareholder.
Add the Income GL Account on the debit side; it should be the same Income GL Account that was previously used in the Mutual Settlement transaction.
Once all details are filled, post the document. The transaction below should appear.
Dr Other Operating Income
Cr Capital issued (Owner 1)
3. Repayment to Shareholder
If repayment to the shareholder has been agreed, record a Bank or Cash Payment using the Transaction Type: Others. In the Payment Details tab, provide the necessary information to process the repayment.
Thank you for being a FirstBIT customer! # pay from owner account