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Invoice for Future Service

I'm sure this is a pretty basic question but I'm new and trying to understand. We send out invoices to customers mid month for service to be completed the following month. One question, does the invoice automatically create an accounts receivable like - Cr customer account Dr accounts receivable? Then when the payment is received do we Dr customer account Cr accounts receivable Dr cash Cr deferred income (liability account)? Then as the service is preformed Dr deferred income Cr sales?

 

Thank you, Marie

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Best answer 07-26-2019

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Re: Invoice for Future Service

@Marie2001 

Marie, I am not sure why this has taken so long to answer, what as you said is a basic question.


1. create a liability account called deferred revenue, and create a service item, name it , and select the deferred revenue account as the income account (linking the account to the item)


2. use that item on an invoice. A/R gets debited for the customer name, and deferred revenue gets a credit

If/when the customer pays the invoice, use receive payments, select the invoice, then use make deposits to get it in the QB bank.  Doing that is a credit to A/R and a debit to the bank.


3. when the job is final, create an invoice, list the items sold (those items should link to an income account), then use the deferred revenue item, set the qty to negative one, and enter the amount. The customer pays the balance if any.
this creates the following entries behind the scenes
debit A/R and credit sales income
debit deferred revenue and credit A/R

maybe leaving a balance due

 

7 Comments
QuickBooks Team

Re: Invoice for Future Service

You've come to the right place, @Marie2001.

 

The best thing about QuickBooks is that when creating an invoice and receiving payments, it will automatically generate a transaction journal report for them. You don't need to enter anything because the system will do it for you.

 

To view the transaction journal, here's how:

 

1. Go to the Customers menu located at the top bar.
2. Pick Customer Center.

3. Select the specific customer at the list.
4. On the Transactions tab, double-click the invoice or payment.

236.PNG
5. Click the Reports tab at the top, then Transaction Journal.

238.PNG
6. Or press Ctrl+Y (Windows) and Cmd+Y (Mac) for the shortcut.

237.PNG

 

 

 

To know more about the purpose of the transaction journal report, check out this article: View the Transaction Journal report in QuickBooks Desktop.

 

For tips and other resources, I recommend visiting our website for reference: Self-help articles.

 

Thanks for being a part of our QuickBooks family!

 

Please let me know if you have any additional questions or concerns, and I'll get back to you. Have a great day.

Community Contributor *

Re: Invoice for Future Service

Thank you very much for your reply. The examples are helpful and I will definitely use them when I'm sitting in front of my computer tomorrow. I realize that QB does things behind the scenes and I was just trying to understand the transaction as if I had to enter it manually. In your example, if I'm correct, it shows a debit to A/R for $25 and a credit to the customer account for $25. Where was the sale recorded and wouldn't that make it out of balance? I'm thinking Dr A/R $25, Cr customer  $25 and Cr sales $25. I'm missing something. Thank you for your time. Marie

 

QuickBooks Team

Re: Invoice for Future Service

Thanks for getting back to us, @Marie2001.

 

Allow me to step in and provide additional information about the transaction journal report when creating invoices and receiving payments.

 

Please know that the account associated with the Account column is Account Receivable and Sales recorded on an invoice. So the customer account will not show in the transaction journal report since the invoice transaction is automatically associated with the customer.

 

Based on your example, the system will automatically generate a transaction journal report this way:

 

  • Debit Account Receivable = $25
  • Credit Sales = $25

Thus, it'll still balance the transaction journal entry of the invoice transaction.

 

Also, when receiving payments, the transaction journal report will look like this:

 

  • Debit Checking or Bank account = $25
  • Credit Account Receivable = $25

This is how QuickBooks generates transaction journal entry when creating invoices and receiving payments.

 

In case you need tips and related articles in the future, visit our QuickBooks Community help website for reference: QBDT Self-help.  

 

If you have other concerns, feel free to comment below. The QuickBooks Community team is always here to help.

Community Contributor *

Re: Invoice for Future Service

Thai you. This is really starting to clear things up for me. One last question, in my example, we invoice on 7/15 for August service.  Rather than associate the invoice with sales should I credit a liability account like deferred revenue and then in August start to debit deferred revenue and credit sales as we earn the income. Or, should I offset the A/R with something else then on August 1st clear that and credit the liability account. I hope that makes sense. I understand what to do it a customer makes a payment but it does seem like sales should be credited until August. Thank you again.

QuickBooks Team

Re: Invoice for Future Service

Allow me to join the thread and help share information on how you can record your transaction/invoice, @Marie2001.

 

You can still record the invoice on July 15, 2019, for the August service. The difference is when running a report in QuickBooks Desktop (QBDT).

 

When running a cash basis report of the invoice recorded, it will reflect on the month of August (when the invoice was paid). On the other hand, using the accrual basis, the invoice will reflect on the month of July (when the invoice was recorded).

 

For additional details about the difference between cash and accrual basis of accounting method, you can check this article: Differentiate Cash and Accrual basis.

 

The workaround or example you've provided (mentioned above) is still possible, however, I recommend checking with a professional accountant to check and record the transaction accordingly.

 

In case you have any other QuickBooks concerns in the future, you can check our help articles: Help articles for QuickBooks Desktop.

 

Let me know if you have any other questions, I'm always here to help, Have a good day! 

Established Community Backer ***

Re: Invoice for Future Service

@Marie2001 

Marie, I am not sure why this has taken so long to answer, what as you said is a basic question.


1. create a liability account called deferred revenue, and create a service item, name it , and select the deferred revenue account as the income account (linking the account to the item)


2. use that item on an invoice. A/R gets debited for the customer name, and deferred revenue gets a credit

If/when the customer pays the invoice, use receive payments, select the invoice, then use make deposits to get it in the QB bank.  Doing that is a credit to A/R and a debit to the bank.


3. when the job is final, create an invoice, list the items sold (those items should link to an income account), then use the deferred revenue item, set the qty to negative one, and enter the amount. The customer pays the balance if any.
this creates the following entries behind the scenes
debit A/R and credit sales income
debit deferred revenue and credit A/R

maybe leaving a balance due

 

Established Community Backer ***

Re: Invoice for Future Service

In addition - if all you are doing is producing regular monthly invoicing early so that it is mailed timely you can auto create (memorized teabsactions) your invoices for example 10 days early but with an Aug 1 invoice date. We do this with tenant rent. Invoices with 8/1 date were created on 7/21 in our system.

 

The mere act of invoicing in theory makes you an accrual basis organization but  the IRS does allow for blended reporting and even though you might invoice (and manage vendor billing) you can still report on Cash basis where income is only recorded when you post received payments and expenses only when you cut checks, not when you are billed.