A client has been using the Receive Payments screen to record payments on account from customers before jobs have been completed and invoices created.

At the financial period end, which steps should be taken to account for these credit balances within Accounts Receivable, assuming they are operating on an accrual basis?

1. Create invoices to clear the credits. Receive payments with a zero total, and match the credits to the invoices
2. Create a journal entry to debit Accounts Receivable, and credit a liability account within the Balance Sheet. Once saved, the journal entry should be reversed at the beginning of the next period
3. Create a journal entry to credit Accounts Receivable for each customer, and debit another asset account within the Balance Sheet. Once saved, the journal entry should be reversed at the beginning of the next period
4. Create a journal entry to debit Accounts Receivable, and credit unearned income within the Profit & Loss. Once saved, the journal entry should be reversed at the beginning of the next period