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Reach1
Level 2

Understanding how Invoices work in QB

Hello, I am trying to better understand the link between Invoicing a customer and how payments made are recorded as income. We are a school and I want to invoice parents (our customers) for tuition fees. I created a line item called Tuition fees and linked this to my Tuition Fee income account. I notice that when I create an invoice, the amount appears in the Tuition Income account even though payment has not yet been received.

 

I understand that when I generate an Invoice this creates the same amount in Account Receivables (AR). I then can 'Receive Payments' and then 'Make Deposits' to get these posted to the bank. This reduces the amount stated in the AR.

 

What I don't understand is that when I create an Invoice, the amount shows in Tuition Fee Income as the full Invoice amount - is that not misleading since the income has not yet been received (until paid?).

Thanks

Solved
Best answer December 25, 2020

Best Answers
GlinetteC
Moderator

Understanding how Invoices work in QB

I'd be glad to share information about how invoices work in QuickBooks Desktop, Reach1.

 

QuickBooks is designed to make your work easier which saves you time. Whether your payments will show up on your invoices depends on your accounting method.  The accounting method you choose determines what's considered as income/expense. There are two types of accounting methods in QBDT. The Accrual Basis and Cash Basis. 

 

Accrual basis shows income regardless of whether your customers have paid your invoices and expenses regardless of whether you have paid all your bills. While Cash basis only shows income if you have received cash and expenses if you have paid cash.

 

If you don't want to see your A/R income until each is paid, switch the basis to a cash basis in the P&L.

 

That should do it! Please let me know if you have any additional concerns regarding accounting methods. I'll be around to help.

View solution in original post

1 Comment
GlinetteC
Moderator

Understanding how Invoices work in QB

I'd be glad to share information about how invoices work in QuickBooks Desktop, Reach1.

 

QuickBooks is designed to make your work easier which saves you time. Whether your payments will show up on your invoices depends on your accounting method.  The accounting method you choose determines what's considered as income/expense. There are two types of accounting methods in QBDT. The Accrual Basis and Cash Basis. 

 

Accrual basis shows income regardless of whether your customers have paid your invoices and expenses regardless of whether you have paid all your bills. While Cash basis only shows income if you have received cash and expenses if you have paid cash.

 

If you don't want to see your A/R income until each is paid, switch the basis to a cash basis in the P&L.

 

That should do it! Please let me know if you have any additional concerns regarding accounting methods. I'll be around to help.

View solution in original post

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