• EH Lim

Advances received from a foreign currency customer

You cannot use the overpayment method on a foreign currency customer; you get a warning message 'Receipt amount exceeds amounts allocated to invoices' when trying to apply overpayment. Use credit note method instead if you are not using the order system.

First, issue a sales invoice to the foreign currency customer with the 'advances received' account, which is a current liability account type, if your customer required an invoice to arrange payment. This invoice debits the foreign currency accounts receivable and credit advances received.

Assuming you issue a sales invoice to a foreign currency customer demanding for an advance payment of US$10,000 at an exchange rate of 1SGD:0.73USD (We will use this rate for the whole case study). This invoice

Debit USD accounts receivable 10,000 Debit USD accounts receivable~~DEL 3,698.63

Credit Advances Received 10,000 Credit Advances Received 3,698.63

Offset the sales invoice via a receipt when the customer paid; you cannot use the overpayment method but to offset the invoice completely (assuming full payment received). This receipt debit the USD bank and credit USD accounts receivable.

You can record a receipt for the advances without first creating a sales invoice if your business policy is not having advances invoice for the customer, it will debit the bank and credit advance received.

Then, use a credit note to reclassify the advances received to the accounts receivable if you prefer to view it or track from the ageing report, or when there are multiple advances received without a proper schedule.

Issue a credit note to the customer with the advances received account and enter 'advance received' (or something similar) at the transaction description field; it helps to differentiate from the other credit note which you may see in the ageing report.

The credit note (assuming same exchange rate used)

Debit Advances Received 10,000 Debit Advances Received 3,698.63

Credit USD Accounts Receivable 10,000 Credit USD Accounts Receivable~~DEL 3,698.63

Amend the 'Type' column formula of the statement, if you require to send statement to the customer, from:

If(Type = "DI@", if(Gross >= 0,"Invoice", "Credit"), if(Type = "CR@", "Receipt", ""))


If(Type = "DI@", if(Gross >= 0,"Invoice", if (Gross < 0 and Transaction.Description = "@Advances", "Adv Rec", "Credit")), if(Type = "CR@", "Receipt", ""))

This formula prints the advances received (a credit note transaction) in the statement as 'Adv Rec' instead of 'Credit' to help reduce confusion.

You may consider engaging a MoneyWorks consultant in your area if you are having trouble customising the template.

Record a product/service invoice once you are ready to ship the goods or perform the services. The invoice (assuming goods valued at US$10,000, which is same as the advances received)

Debit USD Accounts Receivable 10,000 Debit USD Accounts Receivable~~DEL 3,698.63

Credit Sales 10,000 Credit Sales 3,698.63

You can then do a receipt to offset the product invoice and the credit note when received the payment from the customer (if the value of the product invoice is higher than the advances received), or offset the credit note with the product invoice with the contra feature from the Command menu.


1. Sales Invoice for demanding advances.

Debit Accounts Receivable Credit Advances Received

2. Receipt. Receive payment for above invoice (1).

Debit Bank Credit Accounts Receivable

3. Credit Note. Create a credit note to reverse the advances received to accounts receivable.

Debit Advance Received Credit Accounts Receivable

4. Sales Invoice. Issue a sales invoice for the products/services which you sell to the customer.

Debit Accounts Receivable Credit Sales

5. Receipt/ Contra. You can either contra or use a receipt to offset the Credit Note against the Sales Invoice (4).

6. Receipt. Do a receipt for the balance payment received from the customer for invoice (4).

Debit Bank Credit Accounts Receivable

Note: There might be balances in the 'advance received' account if the exchange rate used in advances invoice and credit note (reverse of advances) is different. In this case, you have to pass a journal to transfer the balances from the advances received to the exchange gain/loss account.

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