it is very important that landlords that are using QuickBooks note how to adjust the
receivables account tenants with different payment arrangements can be separated into
separate accounts receivable accounts those who pay in advance can have all their invoices and
payments recorded in the unearned rent account which is a receivable type of account those who
pay after staying can have all of their payments and invoices instead recorded in the past due rent
receivable account keeping them separate will make sure that all your records and QuickBooks
are accurate at any given moment however what if a good tenant starts to pay late well if someone who
used to pay in advance once in a while is paying late that's not really a problem you can keep
doing the same thing in the same way for about one or two months and give this tenants a chance to
catch up and get on their feet however if things get worse and it starts to become a problem you
will have to record the invoices the same way but you have to make sure that any invoice that's not
paid for at the moment that you make it gets chosen as the past due accounts receivable
account in the top right of the invoice window so exactly what you learned in the previous video is
exactly what to do if a tenant who used to pay in advance now starts paying late however what about
a late paying tenant who starts to pay early first of all it's very rare that a tenant will change
from paying late all the time to paying in advance or even vice versa but if it does happen it's not
a problem we just have to recall or that payment twice that's the crucial payment the payment that
changes the balance from negative to positive the first entry is to record the payment amount equal
to the open overdue invoices so in the first entry you have to make sure that the receivables account
is the past due account because that was the accounts receivable account that those overdue
invoices were originally recorded in so those are the ones you're paying off it has to come out of
the same accounts receivable account the second entry record the remainder as a normal credit the
way we did it early on in the course in that case for that second entry make sure the receivables
account is the unearned rent account this will be easy when I show you the example let's imagine on
March 20 Jonny pays 3000 $150 for both past and future rent and he gives check number 847 we know
that Johnny pay 700 a month we know that the first 1050 of that big March 20 payment is paying the
past due invoices and we know that the remaining 2,100 is unearned rent that Johnny will use in the
future so how do we do this well it's no problem it's easier than you think record the payment that
makes the balance change to positive two times and in this case the balance is changing from negative
to positive so on this March 20 payment we're going to record it two times the first time when
we pay off the past two amount we have to make sure that the past due receivables account is
chosen in the top of the window then the excess gets recorded in the second entry we make as
unearned receivables if we receive the payment we open the pay it's window Johnny gave check number
847 and that tenant was Johnny and 5c and the date that he gave us that was March 20 of 2017 now this
is only the first of two entries for check 847 from Johnny on March 20 so for the first one we
can see that he has a balance of 1,050 so we enter the first one with 1,050 when we push the tab key
you can see that the two overdue invoices have been perfectly paid off you should make good use
of the memo field down at the bottom and type into the memo field and explanation that this is only
the first of two entries for the same check from Johnny on the same day and they're both basically
the same transaction and of course you do have to make sure that if they're paying the past
invoices which Johnny is in this first entry you choose past due rent receivable which was already
there because QuickBooks remembers the accounts receivable account per customer save and close
and now we're not finished we have to do the exact same thing again a second time except the second
time around we have to put in the excess remainder of the cheque so it's still check 8:47 okay now we
have to make sure that it's going into the right bank account but now again the only extra thing
you have to do in this second step is make sure you change for the second step the excess amount
you have to make sure you change past due rent receivable to unearned rent because this remaining
2,100 is unearned rent that Johnny will use after March 20 we click Save and close and of course we
print the credit memo for Johnny in this case we'll only print preview because it's a video
and you can see you can take the money from Johnny and give him a rent receipt for 2,100 outstanding
credit remaining rent prepaid into the future the most important thing is that our customer records
are correct when we open the tenant balance detail and look at Johnny you can see he had a positive
balance and owed us up until March 20 March 20 he made such a big payment that the balance went
from positive to negative now it might look like two separate transactions but this is a very easy
workaround when you do your bank reconciliation it is easy to match up the deposits and everything
will be fine but notice all of these were past due rent these were passed to rent invoices and
payments so this part of the payment went into past due rent and the excess went into unearned
rent and now johnny has $2,100 of of prepaid rent that Johnny paid us in advance that he will
use into the future now of course someone will ask what if you keep forgetting to change the
receivables account so in our example the March 20 payment was for both past and future rent and
let's imagine I forgot to change the receivable account I left the mistake for many months without
noticing that I was choosing the wrong receivable account for both payments and invoices for this
customer for this tenant Johnny let's compare the right results to the wrong results the right
way to do it is way the customer balance detail looks now you have two separate transactions or
two entries for this same transaction and notice exactly at the moment the tenants balance went
from positive to negative that's the moment that the account got switched over from past due to
unearned and that would be the right way to do it however if you did it the wrong way you will
notice that you only made one entry for the check that you received and you will notice
that all future invoices were not switched over to unearned rent they was switched over to past due
rent so that's the difference between the right way and the way it would look in the customer
balance detail and the wrong way the way it would look here in the customer balance detail or tenant
balance detail so if you forget to switch accounts it's very simple look at the tenant balance detail
which is also the customer balance detail find the payment that changes the balance from negative
to positive or vice versa fix it by making two separate entries like we showed and make every
following invoice go into the unearned rent income account so let's take a look how to fix the wrong
one so here we are in QuickBooks we open the tenant balance detail which is the same as the
customer balance detail now the first thing you should do is change these invoices from the past
due rent to the prepaid rent or the unearned rent double-click change this to unearned rent save and
close and yes double click this one change it to unearned rent click Save and close and yes
now regarding the payment you can delete it and re-enter it delete click OK now let's reenter
it march 20 of 2017 it was this tenant it was the same check 8:47 it the first money amount was 1050
because you can see the 1050 is the remaining balance okay let's fix this 1050 because that's
the balance when the past due rent is selected as the receivable account okay so we'll let this pay
off what's past due save and new put in the same tenant on the same day with check 847 same check
but this time you're going to choose unearned rent and notice that these invoices are for unearned
rent then you put in the amount of unearned rent and of course it will apply the payment
automatically to the invoices that have that are in the unearned rent account and of course
they'll still be seven hundred dollars remaining as a credit safe and close and we don't have to
print the credit memo we know this 700 remaining and when we come back here it all looks correct