How Adjustments to Transactions Are Calculated

Create adjustments to increase or decrease the balance due on an invoice, debit memo, or chargeback. For example, after receipt application an invoice has an open balance of two dollars. You can create an adjustment for the remaining amount and close the debit item.

Settings That Affect Adjustments

These settings affect the creation and update of adjustments:

Adjustment types: The adjustment type determines what part of the invoice is adjusted: Invoice (entire invoice amount); Line; Charges (late charges and penalties); Tax; Freight.
Receivables activity: The Receivables activity determines the transaction distribution account to use for the expense or revenue generated by the adjustment.
Natural Application and Overapplication rules: The settings for these rules on the transaction type determine whether an adjustment must make the balance due zero, or whether an overapplication is allowed. If the transaction type doesn't allow overapplication, you can't enter an amount that would reverse the sign of the balance of the debit item.
Approval limits: If the adjustment amount is within your approval limits for the currency of the item, the adjustment is approved and the customer balance updated. If the adjustment amount is outside your approval limits for the currency of the item, the adjustment is set to the status Pending Approval until someone with the appropriate approval limits either approves or rejects the adjustment.
Invoices with Unconfirmed Receipts profile option: You can adjust invoices selected for automatic receipt application if this profile option is set to Adjust or Adjust and Credit.
Override Adjustment Activity Account Allowed profile option: If this profile option is set to Yes, you can update the default transaction distribution account determined by the Receivables activity.
Adjustment Reason Required profile option: If this profile option is set to Yes, you must enter a reason for the adjustment.

How Adjustments are Calculated

The calculation for each adjustment type is as follows:

Invoice: Apply the adjusted amount to the entire invoice, or to the installment you're updating if the transaction has multiple installments.

You must enter an amount large enough to close the item you're adjusting. If the Allow Overapplication option on the transaction type is set to Yes, you can enter an amount greater than the balance due.
Line: Apply the adjusted amount to the invoice lines. The adjusted amount is prorated across all lines. If the adjustment includes tax, the amount is prorated across lines and tax.
Charges: Apply the adjusted amount to the charges amount on the invoice. If the adjustment includes tax, the amount is prorated across charges and tax.
Tax: Apply the adjusted amount to the tax amount.
Freight: Apply the adjusted amount to the freight amount.