Understanding payment application

So far, we have discussed various processes by which we can record a customer's outstanding items, and modify them as well as receiving payments from the customer. The last logical step in this cycle is applying the payment to open items. In real life, this seemingly simple task is complicated due to various factors. Consider following situations, which will give you a sense of various payment application considerations:

  • A customer has three open items for $300, $250, and $400. We receive a payment for $700. As this amount can pay only two items at the most, which items should this payment be applied to? What should be done with the remaining payment amount?
  • We receive a payment from a customer, but find out that ...

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