>>Anyone have any thoughts on these two appoaches?

There are several answers:

The cynical answer - and usually the final answer - is that the right way is the way the person writing your check wants it, as long as you don't break the law.

The analytical answer is that as long as you keep an audit trail of what you're doing, either way is OK from an accounting point of view. If you're trying to meet some kind of standard, such as ISO 9000, that will influence your decision, but ISO 9000 compliance or non compliance doesn't make something intrinsically better or worse.

The operational answer is that different business models require different solutions. If you're in a job shop, with lots of activity up and down on one job, it might be good to keep the current balance on the original transaction and keep the original invoice number so that you can easily see the balance on the job.

If you're a distributor where things are normally paid as billed, it might be good to create the credit memo with a new number and zero out the original invoice, so that you can track just the overpayment, and let the original invoice show as completely paid.




>>While converting a system for a client, I'm running into problems with the way they approach things. One is simply the age-old "we've always done it that way" problem. Something more specific is their desire to have an overpayment on an invoice make the invoice balance go negative, effectively making it an open credit that can later be applied against another invoice. So you have a situation where it's an invoice one day, a credit the next. One day you're getting a payment against it and the next you're using it as a payment to pay something else. To me, this is the wrong way to go about it. I have the system never letting a balance fall below zero and generating a credit invoice for the overpayment amount. Then the credit invoice can be used later to apply against another invoice. This causes some issues for them, though I'm going to address them. Anyone have any thoughts on these two appoaches?