How Do I Account For a 'Refundable' Overcharge in Double Entry Accounts?

by Dave Black
(London, England)

In a small non-profit making set-up, in the year 08_09 I charged a client for £300.00. Neither I nor my client had noticed this at the time.

I now find, preparing my annual accounts, that the amount charged should have been £250.00 (an overcharge of £50.00).

I do not want to show this as Income & Expense profit for 08_09, but would rather credit the client towards a future payment – keeping the ‘refund’ at asset level.

I have never met with this type of ‘negative number’ problem before. How do I do this in an accrual double-entry accounts system, and account for this on the balance sheet?