When customers pay in advance for six months of use of a product, we record the deposit in a deferred revenue account (Other Current Liabilities). We then use a recurring journal entry to move portions of the payment by debit to the deferred revenue account and a credit to the product account (Income account). This process appears to be standard practice.
Yet Quickbooks Online records this as a negative balance in the deferred revenue account, and also reports a negative total in the liabilities section of the balance sheet
So for example, a customer buys $10,000 of pretzels to be delivered over 10 months. The bank deposit comes in and we record the $10,000 in the Deferred Revenue Prepaid Pretzels account (A liability account according to the chart of accounts). Each month, a recurring journal entry DEBITS the Deferred Revenue Prepaid Pretzels account $1,000 and Credits the Pretzel Sales account (an Income account according to the chart of accounts).
After two months, we see a negative balance of $8,000 (-$8000) in the Deferred Revenue Prepaid Pretzels account and that amount also shows up under "Liabilities" on the balance sheet as a NEGATIVE number.
Most accounting guidelines suggest that I'm doing something wrong here, but I can't figure out what.
Ideas? Thanks!
