# Journal entry for a customer short payment

> Debit Cash for what arrived and credit Accounts receivable for the same amount. If the deduction is agreed, issue a credit note: debit Sales returns and allowances, credit Accounts receivable. If it is not, leave the difference open on the invoice, marked disputed.

Source: https://lopifi.com/journal-entries/short-payment
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

- **Open on the invoice:** $8,000
- **Received:** $7,800
- **Short paid:** $200
- **Entity:** Illustrative company
- **Basis:** Accrual
- **Currency:** USD
- **Period:** October 2026

## The worked example

A customer owes $8,000 on an invoice due October 15, 2026. It pays $7,800, with a remittance note deducting $200 for two damaged units. The company checks the delivery record, agrees, and issues a credit note for the difference.

### JE-1 · Transaction · October 14, 2026

Apply the cash to the invoice.

| Account | Debit | Credit |
| --- | ---: | ---: |
| 1000 Cash | $7,800.00 |  |
| 1100 Accounts receivable |  | $7,800.00 |
| Total | $7,800.00 | $7,800.00 |

### JE-2 · Transaction · October 16, 2026

Issue the credit note for the agreed deduction.

| Account | Debit | Credit |
| --- | ---: | ---: |
| 4100 Sales returns and allowances | $200.00 |  |
| 1100 Accounts receivable |  | $200.00 |
| Total | $200.00 | $200.00 |

## What the entries do to the accounts

Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.

| Account | Debit | Credit |
| --- | ---: | ---: |
| 1000 Cash | $7,800.00 |  |
| 1100 Accounts receivable |  | $8,000.00 |
| 4100 Sales returns and allowances | $200.00 |  |
| Totals | $8,000.00 | $8,000.00 |

## Why it is booked this way

The cash applies to the invoice it was sent for. What the customer deducted is still on the invoice until someone decides what it is: an agreed concession (a credit note), a disputed amount (left open) or an uncollectible one (a write-off against the allowance).

Each of those is a different entry with a different meaning, so the deduction carries a reason. A short pay never just disappears into a rounding account.

## Common mistakes

- Writing off every short pay to bad debt, which hides price concessions and damaged goods in credit losses.
- Leaving the difference open with no reason, so collections keeps chasing a deduction the company already agreed.
- Crediting the whole invoice when only part of the cash arrived.

## Questions

### Is a short pay the same as a partial payment?

No. A short pay is a payment of less than the invoice with the difference deducted by the customer. A partial payment pays part and leaves the rest owed without dispute.

### Can I just write off the difference?

Only when the customer won't pay and the amount is uncollectible. A deduction for damaged goods or a price concession is a credit note, because the customer doesn't owe it. A write-off says they owe it and won't pay.

## Terms on this page

- [Short pay](https://lopifi.com/md/glossary/short-pay): A customer payment for less than the invoices it settles, the customer having deducted the difference — a dispute, a credit not yet recorded, or an amount to write off. It needs a reason and a disposition; it never just disappears
- [Credit note](https://lopifi.com/md/glossary/credit-note): A reduction of what a customer owes
- [Remittance advice](https://lopifi.com/md/glossary/remittance-advice): The payer's note of which invoices a payment covers and of any deduction taken — the first thing cash application reads
- [Application](https://lopifi.com/md/glossary/application): Assigning received cash to specific invoices
- [Contra-revenue account](https://lopifi.com/md/glossary/contra-revenue-account): An account with a debit balance netted against gross revenue — returns, allowances, sales discounts, rebates — so net revenue is presented after them

## Work with this entry

- [Which invoices make this deposit?](https://lopifi.com/md/tools/subset): Find which open items add up to a deposit, to the cent.
- [Accounts receivable, explained for founders](https://lopifi.com/md/accounting/accounts-receivable): Money customers owe you for work you've delivered and invoiced but haven't been paid for yet. It's an asset.
- [Journal entry for a sale on account](https://lopifi.com/md/journal-entries/sale-on-account): For a sale on credit, debit Accounts receivable and credit Revenue for the price; under a perpetual inventory system also debit Cost of goods sold and credit Inventory for what the goods cost. When the customer pays, debit Cash and credit Accounts receivable.
- [Journal entry for a customer refund](https://lopifi.com/md/journal-entries/customer-refund): To refund a paid invoice, issue a credit note (debit Sales returns and allowances, credit Accounts receivable), then pay the refund (debit Accounts receivable, credit Cash).
- [Journal entry for writing off accounts receivable](https://lopifi.com/md/journal-entries/write-off-accounts-receivable): To write off an uncollectible invoice under the allowance method, debit Allowance for credit losses and credit Accounts receivable. If the customer later pays, reinstate the receivable (debit Accounts receivable, credit Allowance) and record the cash.

*An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the [journal entry balancer](https://lopifi.com/md/tools/journal). General information, not tax, legal or accounting advice. Check with a CPA before you act on it.*