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Join nowHello..I hope someone can help us record this properly. We are a small dance studio, and are using a desktop version of Quickbooks. For a limited number of students, we give scholarships, which are an expense for us (we are for-profit and don't receive any grants). Here's the problem we're having with Quickbooks: If we invoice the student account for the full amount due, and then record our scholarship contribution (as an expense account), then our scholarship contribution shows up as an expense, but the full amount of the invoice shows up as income on the P & L, ( and when it's deposited in the bank account it shows up as income again, so it's double income). But most of these are 100% scholarships, so the student isn't usually paying anything, so it greatly inflates our income.
But if we invoice the student account for the full amount due, and record the scholarship amount as contraincome, then the income on the P & L only reflects what they actually paid, but our scholarship contribution doesn't show up on our expenses.
Can someone help me understand what we're doing wrong in recording these transactions?
Thank you
This previous post is very familiar to your situation and I believe the answer from Jovychris_A is the answer to your question!
You can record the income and an offsetting expense or you can record the income with an offsetting contra-income account. Using a contra-income account is the proper way IMO since these scholarships are not expenses, they are a reduction in income - you're providing free/reduced instruction. If you create an invoice with your fees and an offsetting 'Scholarship' account mapped to an income account, your invoice total should match the payment received from the student. Just make sure you match the payment when you download your bank transactions so the bank deposit doesn't double count your income.
I did all of what you said above and created the contra income account but when I go to accept the payment it is asking me what bank account I want to deposit it into and it's not letting me chose the income account. Where do I send this payment to?
You don't need to assign the payment to income when the payment is received. The income was assigned based on the items on the invoice. When you create an invoice, you are increasing (if positive amount on the invoice) or decreasing (if negative amount on the invoice) the income based on the items on the invoice (assuming the items are assigned to an income account) with a corresponding increase in accounts receivable. The payment received on the invoice reduces your accounts receivable by the same amount as the deposit to your bank account. That is why you need to select the bank account when you receive the payment. The income will hit your books as of the invoice date if you're on accrual basis or as of the date the payment is received if you're on cash basis.
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