cancel
Showing results for 
Search instead for 
Did you mean: 
lori martin
Level 1

Customer Deposits/Prepayments - Am I missing something?

I want to record a customer deposit as a liability and then remove that liability once the job is complete and the customer is invoiced. Sounds simple, but I have not found a good way to do this. I have followed both methods as suggested by QuickBooks but each method has major flaws. Any input would be greatly appreciated. Below is what I have tried and found.

 

The 2 options given to me are;

 

Option 1 - Enter the customer deposit as a sales receipt using the Customer Deposit item I created (which increases the liability as I would like it to) Then when it is time to invoice the customer I have to manually add a line item to the invoice (the same Customer Deposit item) to reflect the amount the customer paid, reducing the invoice total. It did not seem like the best method but it did reduce the liability balance, so ok I thought I could live with it I guess....UNTIL I realized this method COMPLETELY THROWS OFF my P&L - it under reports sales by the deposit amount I enter into the customer invoice - so NO GO  for me, not sure who this would work for.

 

Option 2 - Enter the customer deposit as a credit memo using the Customer Deposit item I created (which increases the liability, so far so good) Then when it is time to invoice the customer I apply the credit memo to the invoice. This method does not throw off the P&L and I do not have to manually add the negative line item to the invoice for the deposit - which I like. However, it DOES NOT decrease my liability. Wth? What do I do with an ever-increasing Customer Deposit Liability?

 

Please help. What does everyone else do to properly record customer deposits or unearned income???

 

 

2 Comments
useranemostatacct
Level 1

Customer Deposits/Prepayments - Am I missing something?

I would also like to know how to handle this.  We have customers who prepay and it needs to be reflected on the accounts receivable as a credit.  

JasroV
QuickBooks Team

Customer Deposits/Prepayments - Am I missing something?

I appreciate you for sharing the details you’ve done, @LORI martin.

 

Allow me to share with you and @useranemostatacct, another way on how to record your customer deposits/prepayments in QuickBooks Desktop (QBDT).

 

You can record their advance payment by receiving the payments. All we need to do is to ensure to mark the credit to be used later. This way, we can apply your customer credit when creating an invoice and at the same time decreasing your liability account. Let me show you how:

 

  1. Go to the Customers menu.
  2. Click Receive Payments.
  3. Enter the needed details and ensure to thick the Leave the credit to be used later option. 1.JPG

     

  4. Then click Save & Close.

To check the available credit of your customer, go to the Customers menu, and select Customer Center4.JPG When you’re ready to apply the credits, simply create an invoice for your customer. Here’s how:

 

  1. Go to the Customers menu.
  2. Select Create Invoices.
  3. Enter the details of the invoice.
  4. Once done, click the Apply Credits from the top bar.
  5. Select the available credit of your customer and click Done.  4.JPG
  6. Then click Save & Close.

You can also check this article for additional steps and other options: Give your customer a credit or refund in QuickBooks Desktop for Windows.

 

Let me also share this article that you can use for reference in reconciling your accounts in the future: Reconcile an account in QuickBooks Desktop. This link can walk you through the steps in accurately matching your accounts in QBDT.

 

You’re always welcome to post a reply in this thread if you any other follow-up questions about recording prepayments in QBDT. I’d be more than happy to help you out. Have a great day and keep safe!

Need to get in touch?

Contact us
Sign in for the best experience
Ask questions, get answers, and join our large community of QuickBooks users.
Sign In / Sign Up