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Highlighted
Level 2

Offset a Payment Advance with Invoice

Hi,

 

I've received approx. 50k beginning of the year from a Customer as Cash Advance to cover costs of my operations. In return for services rendered, we can now send an invoice for approx. 40k. I want to offset the Cash Advance with the invoice (so there is still a 10k cash advance left as liability).

 

I booked the original deposit as a current liability, but I cannot seem to offset my invoice with this account...? The invoice automatically books A/R (Debit) and Sales (Credit)

 

Do I need to do this with a manual entry? How would that work?

 

Any suggestions would be appreciate, because I can't seem to find a solution to this problem. I'm not a full time accountant...start-up life :/

Solved
Best answer 02-26-2020

Best Answers
Highlighted
Level 15

Offset a Payment Advance with Invoice

@Ryan_M 

So totally wrong it defies the imagination.

 

A customer credit memo, because intuit does NOT follow accounting procedures, holds that credit memo in the A/R account, lowering the balance. Depending on the total of outstanding invoices, the balance sheet could show a negative amount for A/R, and will definitely show a low value if not. Good luck explaining that to a banker or auditor.

 

The directions you copied and pasted are incomplete. customer credit memo's require the use of items, yet you gloss over that with no directions on what item to create or how to link it so it works.
Select Credit memo.
Select the customer in question under the Customer drop-down menu.
Fill up the form as necessary.

 

@Bart57 

Booking the advance as a liability is correct.

Create a service type item, name it retainer or something and link it to the liability account (under income account selection)

 

Fill out your invoice, and as the last item, use the
retainer item, qty = -1, enter the amount (that is a negative one in qty)

 

That will apply the amount to the invoice, sales income will be correct, the liability account will be reduced by the amount entered. And if there is a balance owing the customer pays that.

 

 

View solution in original post

3 Comments
Highlighted
QuickBooks Team

Offset a Payment Advance with Invoice

Hi @Bart57,

 

I'll share some insights on how you can record advance payments, and then use it against an invoice.

 

It's a good thing you've already started by creating a liability account. The next step would be to create a service item, and set the liability account in question as the income account for it.

 

Here's how:

 

  1. Highlight the Sales tab.
  2. Go to Products and Services.
  3. Click the New button.
  4. Select Service.
  5. Name it as you wish, then choose the liability account under the Income account drop-down menu.
  6. Tap Save and close.

When it's time for you to charge your customer, you can create an invoice for him.

 

Here's how:

 

  1. Click the + New menu.
  2. Select Invoice.
  3. Choose the customer from the Customer drop-down menu.
  4. Under the Product/Service column, select the service you created with the steps above.
  5. Enter the correct amount  under the Amount column.
  6. Fill out the rest of the form as necessary. 
  7. Hit Save and close when done.

Additional details on this process can be found in this article: Record a retainer or deposit.

 

As for customer overpayments, you can refer to this article for the steps: Handle a customer credit or overpayment in QuickBooks Online. It lists a total of 3 options on how you can manage your customer overpayments. 

 

Have other questions? Place them in the comments below, and I'll get back to you. 

Highlighted
Level 15

Offset a Payment Advance with Invoice

@Ryan_M 

So totally wrong it defies the imagination.

 

A customer credit memo, because intuit does NOT follow accounting procedures, holds that credit memo in the A/R account, lowering the balance. Depending on the total of outstanding invoices, the balance sheet could show a negative amount for A/R, and will definitely show a low value if not. Good luck explaining that to a banker or auditor.

 

The directions you copied and pasted are incomplete. customer credit memo's require the use of items, yet you gloss over that with no directions on what item to create or how to link it so it works.
Select Credit memo.
Select the customer in question under the Customer drop-down menu.
Fill up the form as necessary.

 

@Bart57 

Booking the advance as a liability is correct.

Create a service type item, name it retainer or something and link it to the liability account (under income account selection)

 

Fill out your invoice, and as the last item, use the
retainer item, qty = -1, enter the amount (that is a negative one in qty)

 

That will apply the amount to the invoice, sales income will be correct, the liability account will be reduced by the amount entered. And if there is a balance owing the customer pays that.

 

 

View solution in original post

Highlighted
Level 2

Offset a Payment Advance with Invoice

Thanks! This worked like a charm. Much appreciated.

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