We are a general construction company that uses AIA billing. How do you account for an initial draw i.e deposit that relates to the total contract value?

[qbteachmt]

If you are a Cash Basis tax reporting entity, that is income to you. That is your First payment for that sale.

[Regina_Lend_A_Hand_Accounting]

https://quickbooks.intuit.com/community/Income-and-expenses/Record-a-retainer-or-deposit/td-p/185566...

[Regina_Lend_A_Hand_Accounting]

Actually, if they have a construction project and this is a deposit for the job per the terms of the construction contract, they should create a deposit/retainer account and only apply the deposit against a progress invoice as they make progress on the job per the terms of the agreement. The deposit does not become income until they apply the deposit against the progress invoice.

[qbteachmt]

A Cash Basis entity has Income when they receive funds; an Accrual Basis entity would track this as liability. In either case, any of the QB programs allow you to track it as "prepayment" by using "Items/Services" that allow the item to flow to your accounting, to meet your accounting requirements. The use of the Other Charge type item linked either to liability or income, allows you to operationally process this as prepayment and then to apply it to later sales, without impacting your accounting and tax reporting requirements.

[Regina_Lend_A_Hand_Accounting]

When you receive a deposit/retainer for a construction job in-progress (and often under contract) it is not income until a progress invoice has been created and the deposit/retainer on file has been applied as payment against this progress invoice.

For those of you who don't know, "AIA Billing" is "Construction Progress Billing". I believe this company received a deposit/retainer and not a first payment on a sale. That is unless they have created a progress invoice for the contracted job to apply this deposit/retainer against.

[HillCC]

I wish I could figure out how to explain this to our tax accountants.  They made me create an invoice in 2018 to apply the payment to, which I then had to create a credit invoice in 2019 to offset it.  I totally understand their thinking, but I can't apply that payment to an invoice as it hasn't been billed to the client yet...and they won't listen to me.  It needs to go into a holding account (like a customer security deposit in property management) to be applied or returned at a later date.  I just can't get them to understand that.  So I play their game and correct it in the next year.