Got a question about recording deferred revenue. We are a new surgery clinic that asks patients to pay the entirety of their bill prior to their date of surgery. Initially we ask for a $500 non-refundable deposit payment then 2 weeks prior to the date of surgery, we receive payment for the remaining amount. I am wondering how we should record this?
Should I credit deferred revenue for the $500 the day we receive the deposit, then debit cash for the same amount? And repeat that for the 2 weeks prior payment? Following that after the surgery is complete, should I then debit the deferred revenue account for the entire bill and credit revenue?
Is there also a way for QuickBooks online to do this automatically, or will I need to manually do this for each payment prior to the surgery, and when the service is rendered?
Let me provide you some steps and information to ensure you’ll be able to track the customer's prepayment, so you can efficiently manage your business.
Please know that you'll have to manually enter the payment in QuickBooks Online.
To begin, you’ll need to set up an item and account (a liability account) for customer deposits.
Go to Accounting on the left panel, and select Chart of Accounts.
On the upper right click the New button.
In the Account Type drop-down, select Other Current Liabilities.
In the Detail Type drop-down, choose the type of account you want to create and enter the Customer deposit in the Name field.
Fill in the field boxes. Then, click on Save and Close.
Next, create the item or services you’ll use to invoice customers for the deposits. You can follow the steps below:
Go to the Gear icon at the top, and choose Products and Services.
In the Products and Services window, select New. Then, choose Service.
In the Name field, enter Customer Deposit and fill in the field boxes.
Once completed, click Save and Close.
The payment will show as a liability on the balance sheet since the transaction is not yet complete to earn the revenue. By the time you’ll be creating the actual invoice, make sure to enter the Customer Deposit.