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RCInteriors
Level 2

Interior design taxes

Hi there!

 

I'm wondering if anyone knows the answer to the following. As an interior designer, my clients pay me for furniture and then I purchase the products directly from the vendor on their behalf. This has me a little baffled with the year end because my clients have paid me in December 2020 and my receipts for purchasing their furniture are dated December. However the vendors only charge me upon shipment which will be in January.  So will these payments in December look like income because nothing came out of my account until January. Thank you in advance to anyone who knows the answer to this one! 

Solved
Best answer January 07, 2021

Best Answers
JessT
QuickBooks Team

Interior design taxes

Hi RCInteriors,

 

Welcome to the QuickBooks Community!

 

I'll guide you in recording your customer payments for the raw materials without showing it as an income in December 2020. However, please have this checked with an accountant to be sure you'll have the right reports.

 

First. Record the money you received as a bank deposit and use the Accounts Receivable (A/R) category. This will increase your bank balance, and the money can be used to purchase the materials. This will also create a credit on your customer's profile because we use the A/R category.

 

Second. Record your purchases and tag them as billable to the customer.


 

Third. In January, invoice your customer with your service. You can add the billable expenses or create a separate one for them. Anyway, this portion will be paid using the credit.

 

 

Fourth. Pay the invoice and use the credit to pay the portion of the billable materials. 

 

 

That's it. You can also check out more related posts about recording customer prepayments or situations like this one. Just click on Help and use keywords like advanced payments for materials or something similar.

 

You can always go back to this thread if you have other questions in mind. Have a good one!

View solution in original post

5 Comments 5
JessT
QuickBooks Team

Interior design taxes

Hi RCInteriors,

 

Welcome to the QuickBooks Community!

 

I'll guide you in recording your customer payments for the raw materials without showing it as an income in December 2020. However, please have this checked with an accountant to be sure you'll have the right reports.

 

First. Record the money you received as a bank deposit and use the Accounts Receivable (A/R) category. This will increase your bank balance, and the money can be used to purchase the materials. This will also create a credit on your customer's profile because we use the A/R category.

 

Second. Record your purchases and tag them as billable to the customer.


 

Third. In January, invoice your customer with your service. You can add the billable expenses or create a separate one for them. Anyway, this portion will be paid using the credit.

 

 

Fourth. Pay the invoice and use the credit to pay the portion of the billable materials. 

 

 

That's it. You can also check out more related posts about recording customer prepayments or situations like this one. Just click on Help and use keywords like advanced payments for materials or something similar.

 

You can always go back to this thread if you have other questions in mind. Have a good one!

View solution in original post

RCInteriors
Level 2

Interior design taxes

Thank you so much Jess!! This helps so much. 

 

Rebecca

RCInteriors
Level 2

Interior design taxes

Thank you so much Jess!! Yes helps a ton!

Rebecca 

Amy71
Level 1

Interior design taxes

Hi Jess, 

Thank you for the explanation below. I am new to quickbooks in this aspect and use QB mostly for invoicing for my billable hours. My question is very similar but with one other aspect - how to account for profit on resale?

 

I have a client I will be purchasing furniture for at wholesale pricing and then marking up and reselling to them. My question is, How do I account for the profit. For example:

1) I invoice my client $6000 + NYS sales tax for furniture my biz purchased on their behalf for a design project

2) My client pays me via check $6000 + NYS sales tax for furnishings

3) I am use my biz credit card to purchase $5000 worth of furniture from the wholesale co. that I will be reselling immediately to the client

4) I pay my credit card bill of $5000 for this project. 

What steps in QB do I take to enter these transaction correctly so that the $1000 shows as a profit for this project and the $5000 is an expense. 

Thank you in advance. 

Amy Hill

 

CML83
Level 1

Interior design taxes

Hi Amy,

 

Did you ever figure this out?  I'm trying to make sure that I follow the "right" steps as well and struggling as accounting was not my strong point!

 

Christina

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