how to record a retainer payment to a vendor in quickbooks desktop

Hello there, Villet.

You have two options on how to record vendor prepayments. You can either use an Accounts Payable or Asset account to track the retainer. The Accounts Payable account is created by default by QuickBooks you can directly create a check for the deposit and then enter the bill given by your vendor. From there you can link the check to the bill. If you choose to use an Asset account, you'll want to create one first. 

Here's an article will walk you through the detailed steps on how to record vendor prepayments and apply payments to them. To keep track of your vendor transactions, you can pull reports and customize them.

Let me know if there's anything else that you need help with. Take care and stay safe!

Thank you so much for your guidance! But I think I need a little more. I went and read the article you recommended. I chose "Option 2: Use an Asset account to track the prepayment." But I became stuck at Step 2. Can you help?

Below quoted are the first steps in the article, and the place where I am stuck, indicated with my comments. Please note I made this prepayment (a retainer fee for an attorney) a couple months ago by credit card, so I am trying to properly assign that payment. I am using Quickbooks Premiere 2013 desktop. My comment is in >> Italic bold below...
Thank you! Villet1 (Same as Villet), Jonathan Villet

1. Create an Other Current Asset (OCA) account to track prepayments. 
   >> Good! I did all of Step 1.
1. Go to the Lists menu, then select Chart of Accounts.
2. In the Chart of Accounts, right-click anywhere, then select New.
3. From the Other Account Types drop-down, choose Other Current Asset. Select Continue.
4. Enter Prepaid Inventory as the Account Name.
5. Select Save & Close.
2. Write a check to your Vendor.
   >> This is where I am stuck (and also under Step 3, entering the bill from Vendor.) I paid this bill previously (October 2020) by credit card, so I did not write a check under this step. I looked at the previous credit card charge and there is no place to assign an account as you can do in the Write Check function. How do I use my credit card payment instead of a "Write Check" to show this deposit paid? BTW I assigned the bill to the OCA account in the Invoice from Vendor, see below under step 3, but I haven't adjusted the amount to be a negative amount yet. 

1. Go to the Banking menu, then select Write Checks.
2. Enter the vendor name, date, and payment amount.
3. Go to the Expenses tab. In the Account column, select the OCA account.
4. Select Save & Close.
1. Enter the bill when the items arrive.
   >> Here is where I am stuck also. I had previously entered this bill from vendor. I have now altered the account (from a legal expense) to the OCA account I created above under Step 1. But I did not change the amount as a negative amount yet, since I did not complete step 2, above.

1. Go to the Vendors menu, then select Enter Bills. >> DONE
2. Go to the Expenses tab, then select the OCA account. >> DONE
3. Enter the amount of the prepayment as a negative value. >>  NOT DONE YET
4. On the Items tab, enter the items. The bill will equal the balance owed after deducting the prepayment. Note that recording the bill will reduce the asset account.
5. Select Save & Close.
1. Pay the bill balance.

1. Go to the Vendors menu, then select Pay Bills.

Select the bill you entered, then Pay Selected Bills. QuickBooks will then create a Bill Payment Check for the balance.

Hello again, @Villet1.

Thank you for keeping us updated about the outcome when trying the steps suggested by my colleague @Catherine_B.

If you treat your credit card as a vendor, you enter transactions in the Write Checks or Enter Bills window. Keep in mind that the charge from your vendor must be posted to the Purchase Prepayments current asset account you created and not to an expense or Inventory account.

If you record your credit card transactions as they occur, using a Credit Card account, follow the below steps:

1. Go to the Banking menu at the top. 
2. Select Enter Credit Card Charges.
3. Pick the credit card you used for this payment. 
4. Enter the vendor’s name in the PURCHASED FROM field.
5. Fill in the amount and post it to the current asset account for prepayments.
6. Hit Save & Close.

However, before we proceed with the steps, I highly suggest consulting your accountant or accounting professional for guidance on how your business should classify the prepayment. 

Moreover, I don’t like to leave you empty-handed, you'll want to visit our Community Help Articles hub in case you need some related articles in managing your account.

As always please let me know how this goes or check back if you need help with QuickBooks. Have an awesome day!

@MirriamM thank you for this explanation. Please tell me if I understand correctly that I had already recorded the invoice and credit card payment of that invoice from vendor (attorney) as needed, so nothing more to do:

> I had made an OCA 

> I changed the posting of the invoice (for retainer deposit) to the OCA (not to a legal expense account as done previously).

> I had posted the credit card payment to the vendor/attorney to pay that particular bill for the retainer/deposit.

That's all. I think I am complete?
So I did NOT need to follow the additional steps, such enter the amount of the bill as a negative value under expense, etc. in the prior advice from @Catherine_B (thinking I was issuing a check, which I was did not, since I had paid by credit card.)
Yes I pay the credit card as a vendor. 

Follow-up question: the attorney bills their work separate,y, leaving the deposit untouched. When the attorney's job is complete and he returns the deposit in its entirety to me, what step do I take then? How will I record the deposit?

You and @Catherine_B have been very helpful, so thanks!

Hi there, Villet1.

I appreciate you for coming back to add further clarification to your concern so I can present accurate details.

You're on the right track in recording the vendor prepayments or deposits for prepaid parts or services. However, this is not the complete process. You'll need to create a journal entry to take the asset and transfer it to A/P so you can apply a credit/payment to the Bill using the JE. I suggest consulting an accountant before performing the process. They can provide suggestions on how to properly handle the account, especially with the category to use for the debit and credit to make sure your account stays accurate.

Here's how:

1. Go to the Company menu at the top.
2.  Choose Make General Journal Entries.
3. Fill out the fields to create your journal entry. Make sure your debits equal your credits when you’re done.
4. Hit Save or Save & Close.

For additional information, you can click this article: Create a journal entry in QuickBooks Desktop for Windows or Mac.

On the other hand, when the attorney's job is complete and the time he returns the deposit to you, you can make a deposit in QuickBooks Desktop. Make sure to use the same account from the original transaction to offset the remaining amount and this will go back to the bank. You can click this article to see the process: Record and make bank deposits in QuickBooks Desktop.

Please click this link to see different articles about how to manage your QuickBooks account to ensure that you have correct data entries: Get started.

Keep in touch if you need further assistance with this, or if there's anything else I can do for you. I've got your back. Have a good day.

We received a retainer from one of our clients, I put that in using the retainer section.  As they received invoices, the invoice amount was subtracted from total retainer in the Customer section. But now I see it's not clearing out of Account Receivable. The total retainer amount is still showing there. How can I clear that out?

Hi there, @bkrush01. I'm here to ensure you can clear out the collectibles using the retainers.

First, let's check the outstanding invoices by running the Open Invoice report. This way, we can verify if the retainer was credited to the invoice.

Here's how:

1. Go to the Reports menu.
2. Select Customers & Receivables and choose Open Invoices.
3. Make sure the date is set to Today.
4. Look for the customer's invoice you have applied the retainers into. 

If it's still showing in the report, make sure that you've set up the account and item for the upfront deposit or retainers. You can follow our guide for the detailed steps: Manage upfront deposits or retainers.

I'm also including these articles to guide on how to update the retainers account and item:

• Add, edit, or delete accounts
• Add, edit, and delete items

Please come back if you need further assistance in handling upfront deposits. It's our priority to ensure everything is straightened out.