Natural Application and Overapplication

The transaction type that you assign to a transaction defines the type of application permitted against the transaction balance. This definition is managed by the Natural Application Only and Allow Overapplication options on the transaction type.

Natural application only lets you apply a payment or credit to a transaction that brings the transaction balance close to or equal to zero. For example, if an invoice has a balance due of $400, you can make applications against this transaction up to $400 only. With natural application, you can only bring the balance to zero.

Overapplication lets you apply more than the balance due on a transaction. For example, if you apply a $500 receipt to a $400 invoice, this overapplies the invoice by $100 and reverses the balance sign from positive to negative.

Use of Natural Application and Overapplication

Whether or not a transaction allows overapplication determines the actions that you can take on that transaction.

If a transaction that allows natural application only is paid in full, then in order to credit the transaction you must first unapply the receipt from the transaction before creating the credit.

If you want to use AutoInvoice to import credit memos against paid invoices and evaluate these credits for automatic receipt handling, then the transaction type of the paid invoices must allow natural application only. However, if the Receipt Handling for Credits option isn't enabled on the transaction source of the transaction, AutoInvoice leaves the related credit memo in the interface tables until you unapply the receipt from the invoice.