Accrued income entries

Thanks for laying out the details of your concern, @tfleu3.

I'll help you record these accrued income entries in QuickBooks Desktop (QBDT).

We can set up a progress invoice for the contract date with the year-end and rental charge. This way, you can invoice customers for partial payments instead of asking for full payment at the beginning of the project.

Then, create a liability account to track the deposit amount for the card $1500. Here's how:

1. From the Transactions menu, choose Chart of Accounts.
2. From there, right-click and select New from the pop-up menu.
3. Choose Other Current Liability as the account type.
4. Enter the name of the account in the Name field.
5. Click Ok.

Once done, assign it to the specific item for the deposit. You can follow the steps below.

1. Click the Lists menu and select Item List.
2. Then, right-click and select New from the pop-up menu.
3. From the Type drop-down menu, select the purpose of the deposits you collect. You can choose Service if you collect upfront deposits for services, or Other Charge if you collect upfront deposits for products.
4. Enter a name for the item in the Item Name/Number field.
5. Choose the Upfront Deposit liability account you created from the Account drop-down list.
6. Tick Ok.

Then, create a sales receipt to record it.

From there, you can use the same account or you'll want to create another one, and then assign it to the service item named Retainer for the prepaid rent of $12,000.

For a detailed step-by-step process about recording retainers or deposits in QBO: Manage upfront deposits or retainers.

On top of that, I've included this resource to help you monitor your sales, expenses, and accounts payable using reports: Customer, job, and sales reports in QuickBooks Desktop.

I'll be around if you need further assistance with recording your transactions. I'm very eager to help. Take care always.

Hello Carneil_C

Thanks for your message. However, I am still looking for a way to solve the same problem, and please let me explain what is the situation and see if QBE can do this automatically:

Nature of the business: Space renting
Terms: Prepaid by 12 month basis. 
Deposit: 1 Month deposit
Prepaid income: $10,000 a month, i.e. $120,000 prepayment PLUS deposit $10,000 = $130,000 cash in bank

Date of starting the rental: 14th June 2023 (until 13th June 2024)

Company financial year 31 Dec 2023

Issue:

1) The un-realised income after 31 Dec 2023 (i.e. income prepaid for 1/1/2024 - 13 June 2024 will be treated as an liability account at cut off as at 31 Dec 2023.

2) Custom deposit of $10,000 at the beginning accounting entry in QBE
3) We have only created ONE invoice to the customer and we would like to have ONE entry to reflect such transaction.

Required: 

1) Rather than using excel to manually calculating the customer income and deposit (as liability account) at month end/year end cut off, is there any function to run automation to record income on monthly basis and also to reduce the liability account at the same time? Hence I have more than 200 customers and manually adjusting the unrealised future profit every month would involve a lot of human hour. 
2) Is there any ways to also recognise the customer deposit at the very beginning so that I can recall the same entry and understand who and why there is such a deposit?


Thanks

Thanks for a prompt reply, @tfleu3.

Since there's an invoice, there's also an available sale. If that's in 2023, the realized income is reported in 2023.

Also, a prepayment is recorded as a bank deposit or a cash-in entry, which affects the bank or any assets and is categorized as a liability. Then, there's a recurring decrease in that liability account as a customer is invoiced monthly. 

Can you enlighten me about the invoice part? For us to further help you. Otherwise, you would need to consult an accountant for this situation. 

We can do the technical part. However, we must understand the accounting process to ensure the amounts are correctly reported in each fiscal year.

Additionally, if you want to generate rules to help QuickBooks match your Bank Feeds transactions, you can read this article: Create rules to categorize transactions in QuickBooks Desktop.

You can return here if they have instructions you find challenging to reflect in QuickBooks.  Keep safe always, and have a good one.

Thanks a lot for your reply @Bryan_M

Invoice to customer at 14 June 2023, sale as below accounting entry:

Re the accounting side, what we would like to achieve is as follow: 

14 June 2023

Dr Cash $130,000

Cr Deposit $10,000

Cr Customer deposit $120,000

30 June 2023 (17 days after the invoice)
Dr Customer deposit $5,666 (10,000 * 17/30 days)
Cr Profit $5,666

31 July 2023 (same procedure but looking for an automation to calculate the number days, or any tools QBE would be able to calculate based on the per day or per month basis would be good)

Dr Customer deposit $10,000 (Full month effect)
Cr Profit $10,000

Aug, Sept, Oct, Nov, Dec 2023 (same procedure)

Dr Customer deposit $10,000 x 5

Cr Profit $10000 x 5

31 Dec 2023 Closing

1) Want to see:

B/S Customer deposit: 120,000 - 5666 (June) - 60000 (6 full month from July - Dec) = $54,334

2) P/L item: Sales/Profit at the end $65,666
3) B/S item: Customer deposit $10,000

Thanks for your help

Hello there, @tfleu3

I appreciate you entering all the details of your desired outcome for your financial records! Ensuring accuracy in your business reports is crucial, and I'm here to help guide you through this process.

Once you create an invoice, it will affect the accounts receivable account. The transaction journal you described for the invoice isn't possible due to the affected accounts and transactions.

By using the retainer method, you can easily create a memorized invoice to record automatically per month. This way, your income will be offset by your liability in each invoice.

First, go to the Accountant tab and select Chart of Accounts. Create two Retainer/Upfront Deposit accounts under the Other Current Liability type. You'll use these accounts to deposit the amount paid by your customers, while the other account is for the prepaid deposit. Next, create two service items under each retainer/deposit account.

Let's now record everything. Here's how:

1. Go to Customer Center by pressing Ctrl+J on your keyboard.
2. Create a Sales Receipt transaction for your customer. Ensure the correct date and information.
3. Enter the service item with an amount of $120,000 (Upfront).
4. Enter the other service item amounting to $10,000 (one-month Prepaid Deposit). Ensure the service items are under separate Other Current Liability accounts.
5. Click Save & Close.

Next, create an Invoice for the June payment. Ensure the correct date and negative amount to balance the income and liability.

Create another invoices for each month of July until December with the same amount.

It will show zero amount because we balanced the income and liability account. You received rent income, and you have nothing to worry about the upfront deposit liability for each month that passes by.

Now if you look at the Balance Sheet report, you'll see the correct amounts under the appropriate accounts.

Additionally, you can check this article, as you may need it in the future: What transactions are not supported by Balance Sheet by Class in QuickBooks Desktop?

Please don't hesitate to leave a reply if you have further concerns about recording rental business in QuickBooks Desktop. I'm always here to assist you.

@tfleu3 

The terminology used here is not quite accurate.  In your example, the $120K prepaid rent is considered Deferred Revenue, not a customer deposit.  There is no accrued income in this scenario.  Accrued income is when you provide a service and record the income but have not been paid (think accounts receivable).