When customers over pay you there are a variety of ways to handle the overpayment. A few have been shown as examples below. Please consider the timing and tax implications for your specific circumstance as these are general examples.

Issuing a refund for the excess amount.

• Apply a Payment to the Sale as you would normally for the portion of the Payment that will cover the Sale amount. You will obviously have a residual amount left over at this point.
• Enter the residual amount (the remaining portion - the over payment) as a General Journal transaction for the same transaction Date as the Payment Date (not Sale date) that you used above. e.g. if you had received $150 for a $100 Sale then the General Journal entry would be:
  

  DEBIT	Asset: MyBank Account for $50 (leave tax code blank)
  CREDIT	Loan: Deposits Received for $50 (leave tax code blank)

  Note: In accounting you Debit a bank account when you are adding/depositing money into your bank account. See what are Debits and Credits if you are still unsure.

• On the day you decide to pay a refund create a General Journal entry that represents the refund payment you make (the over payment portion). E.g. If this was refunded using your bank account then the entry might be:
  

  CREDIT	Asset: MyBank Account for $50 [leave tax code blank]
  DEBIT	Loan: Deposits Received for $50 [leave tax code blank]

Note in the General Journal transaction is clearing out the first one, just at a later date. This may be important when reporting your Balance Sheet position particularly if this occurs over a financial year end or other tax reporting period.

Applying the overpayment to another invoice

• From the List of Sales search for the Sale the payment was intended for and then select the checkbox for it. Click the Pay Selected link at the top of the List of Sales
• The Receive Payment screen will appear.
• Where is says Show outstanding invoices for choose the Contact you have received the over payment from and then click the Show Unpaid Sales button to get all for that Contact to display in the list.
• Check the box next to the intended Sale that this payment is for and enter the full amount required to clear the sale.
• Choose another Sale (or Sales) to apply the balance of the payment to and check the box next to that Invoice and enter the balance of the payment that is available.
• At the bottom of the screen the Amount remaining to be allocated should balance to zero. Click Save and Close.

Taking the excess as a pre-payment deposit.

• Create a General Journal entry as follows:
  

  DEBIT	Asset: MyBank Account (leave tax code blank)
  CREDIT	Loan: Deposits Received (leave tax code blank)

• Later when you issue a new Sale to the customer for goods or services you can pay that Sale using a clearing Account that you may need to setup. For example a bank Account called Asset: Clearing Account. Use this Account when applying payment to the Sale.
• For the same Transaction Date as in the previous step clear out the Asset: Clearing Account and also your Loan: Deposits Received Account with the following General Journal:
  

  CREDIT	Asset: MyBank Account (leave tax code blank)
  DEBIT	Loan: Deposits Received (leave tax code blank)