customer prepayment

Hello there, @JimPost. 

I appreciate you sharing the steps that you need about your prepayments.

Yes, you're correct that the prepayment is treated as a liability to offset the deposit asset into your bank account. When you invoice the customer and receive payment against it, you'll turn that liability into income.

I'd be delighted to guide you through how to utilize the prepayment and pay it by creating an invoice.

First, let's make an invoice for the deposit from your customer. Here's how: 

1. Go to the Plus icon (+) at the upper right. 
2. Under Customers, select Invoice.
3. Choose the Customer name from the drop-down list.
4. In the Product/Service column, select the Retainer or Deposit item you've set up.
5. In the Rate or Amount column, enter the amount received for the retainer or deposit.
6. Click Save.

Then, you'll need to turn retainers into credit on an invoice and receive it like a payment. Here's how: 

1. Create an invoice that lists the services or goods you provided for your customer.
2. In the Product/Service field, select the Retainer or Deposit item.
3. Enter the retainer amount as a negative to subtract it from the invoice.
4. Click Save. 

Please see the screenshot below to show you the last three steps. 

By doing so, it will decrease the amount in your liability account and applies the credit to your customer's invoice. This will turn into income.

For more details about prepayments in QuickBooks Online (QBO), here's a great article you can check out:  How to Record A Retainer or Deposit. 

Please let me know how it goes on your end, @JimPost. I'll be here If you have follow-up concerns about this or should you need anything else. Cheers!