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Von-1
Level 1

customer invoice item needs to point to a liability account for a depsoit/retainer

We run a tour company and  require a minimum number of customers on most ocassions to proceed with any given tour. When we invoice an individual client we need to treat the amount received as a liability (deposit) until we have sufficient customers to run the tour. How do I invoice the client but instead of allocating the item as income the item or product/service needs to be a liability,

Solved
Best answer July 18, 2023

Best Answers
Carneil_C
QuickBooks Team

customer invoice item needs to point to a liability account for a depsoit/retainer

Thanks for your reply, @Von-1. Let me provide additional information on handling customer refunds in QuickBooks Online.

 

If the invoice has been paid and your customer wants to reduce their current balance immediately, we can utilize the adjustment note. I'll show you how: 

 

  1. Go to + New and select Adjustment note.
  2. From the Customer field, choose the appropriate customer.
  3. Enter the Adjustment Note Date, AmountGST, and Product/Service (This is the category, product, or service you're getting credit for).
  4. Click Save and Close.

 

Otherwise, here's how you can refund an invoice that your customer has already been fully paid for: 

 

  1. Click + New and select Refund receipt.
  2. Choose the customer you want to refund from the Customer ▼ dropdown.
  3. Enter the details in the fields using the info from the original sale.
  4. Select which payment method and account you wish to refund the customer from.
  5. Tick Save and Close.

 

To learn more about it, please review this handy guide: Handle customer refunds in QuickBooks Online.

 

In case you'd like to send your customer a summary of their invoices, payments, credits, and balances. See the following article for detailed guidance: Create and send customer statements in QuickBooks Online.

 

You can always reply or reach out to us again if you need anything else with transactions in QBO. We're always here to guide and assist you whenever you need help.

View solution in original post

5 Comments 5
Adrian_A
Moderator

customer invoice item needs to point to a liability account for a depsoit/retainer

We can set up a retainer, Von.

 

The retainer is a liability to show that, although you received the money, it only belongs to you once used to pay for services. I'm here to guide you through the process.

 

First, we'll need to create a liability account to track the amount you received. Here's how:

 

  1. From the Accounting tab, select Chart of accounts.
  2. Click New.
  3. From the Account Type dropdown menu, select Current liabilities.
  4. From the Detail Type dropdown menu, select Client Trust Accounts - Liabilities.
  5. Enter a Name for the account.
  6. Select a Default GST Code, enter an Unpaid balance, and an as of date.
  7. Select Save and Close.

 

Then, let's set up a retainer item:

 

  1. Select Products and services from the Sales tab.
  2. Click New.
  3. From the Product/Service information panel, select Service.
  4. Give it a name.
  5. From the Income account dropdown, select the liability account.
  6. Click Save and close.

 

Afterward, you can create a liability account if you want to keep the money you received in a separate trust account. Lastly, you can create a sales receipt or invoice for the retainer you received. I've added this article for the detailed steps to add an invoice: Step 4. Create a sales receipt or invoice for deposits or retainers.

 

Also, if you use an external platform to process payments, you can keep track of those payments in QuickBooks. Here's an article for reference: Record invoice payments in QuickBooks Online.

 

I'm always around whenever you have concerns about recording a retainer.

Von-1
Level 1

customer invoice item needs to point to a liability account for a depsoit/retainer

Thanks for the repsonse Adrian_A.  I had already followed those instructions to record a retainer or deposit and everything now appears to be correct in the chart of accounts, balance sheet and profit/loss reports.

If the tour has insufficent numbers to proceed how do I refund the payment received which is being held in a liability account? I have read the article on how to handle customer refunds in QBO but I am confused whether  we should use an adjustment note or a refund receipt? The invoice is fully paid and we are using Simple Start QBO on a cash basis.

Carneil_C
QuickBooks Team

customer invoice item needs to point to a liability account for a depsoit/retainer

Thanks for your reply, @Von-1. Let me provide additional information on handling customer refunds in QuickBooks Online.

 

If the invoice has been paid and your customer wants to reduce their current balance immediately, we can utilize the adjustment note. I'll show you how: 

 

  1. Go to + New and select Adjustment note.
  2. From the Customer field, choose the appropriate customer.
  3. Enter the Adjustment Note Date, AmountGST, and Product/Service (This is the category, product, or service you're getting credit for).
  4. Click Save and Close.

 

Otherwise, here's how you can refund an invoice that your customer has already been fully paid for: 

 

  1. Click + New and select Refund receipt.
  2. Choose the customer you want to refund from the Customer ▼ dropdown.
  3. Enter the details in the fields using the info from the original sale.
  4. Select which payment method and account you wish to refund the customer from.
  5. Tick Save and Close.

 

To learn more about it, please review this handy guide: Handle customer refunds in QuickBooks Online.

 

In case you'd like to send your customer a summary of their invoices, payments, credits, and balances. See the following article for detailed guidance: Create and send customer statements in QuickBooks Online.

 

You can always reply or reach out to us again if you need anything else with transactions in QBO. We're always here to guide and assist you whenever you need help.

RoseGirl23
Level 1

customer invoice item needs to point to a liability account for a depsoit/retainer

I'm having a similar issue.  However, QBO will not allow me to select a non-income account.  I'm trying to select a receivable or liability account, but when I do, I get the following error:

 

We couldn't save your item.

You can only use specific types of accounts to track products and services. If an item is something you sell, use an income account. If it's something you buy, use an expense account.

 

How do I fix this?

GenmarieM
QuickBooks Team

customer invoice item needs to point to a liability account for a depsoit/retainer

Your successful inventory management is my priority, RoseGirl23. I'll provide valuable tips on how to handle that situation.

 

When setting up your retainer item, it's important to consider how you've configured it. The way you've set it up could be the reason why you're encountering an error message when trying to save the item. If you use this item for buying and selling, you should ensure that the I sell this product/service to my customers option is selected. This will ensure that the income and expense accounts are associated with the item.

 

I would also appreciate it if you could include a screenshot so we can give you accurate steps in fixing this matter.

 

For detailed information about setting up a retainer item, feel free to visit this article: Record a retainer or deposit.

 

Let me know how it goes by leaving a reply below. The Community is always here 24/7 to provide our customers a helping hand with any QuickBooks-related concerns.