Adjust a liability and income account for a closed period (desktop)

I understand the whole scenario however I am not quite sure what's happening in the GL. It's hard to suggest because it could be that your revenue and/or liability is understated.

Ideally this is what should have been done:

Deposit received in Separate Fund Account 

1) Initially Create Bank Deposit for Fund Account
2) Allocate it to Security Deposit Liability Account

When invoiced

1) Create Invoice lines with total revenue amount
2) Add additional line for Security Deposit with negative amount
(You will have to add a non-inventory product and allocate security deposit liability as income account)

Since there is separate fund bank account for security deposits it's important to make sure a transfer is done both on GL and in the bank when the invoice is generated

This will ensure that:

a) revenue is booked correctly

b) liability is reduced

c) invoice amount reflects the correct o/s balance

d) at all times your security deposit bank account should match security deposit chart of account

I’ve got a pretty good handle on how to record things going forward, it’s correcting for closed periods that I’m unsure about. Should I make an adjusting journal entry?

Yes, I would suggest doing adjusting JE if your revenue is not materially misstated in the closed period(s). 

Welcome to the QuickBooks Community, Felix.

I can offer assistance on how QuickBooks Desktop handles upfront deposits.

You can set up an account for upfront deposits or retainers to ensure funds are accounted for properly and prevent discrepancies moving forward.

Let's start by setting up a liability account for your upfront deposits. Here's how:

1. Go to Lists, then Chart of Accounts.
2. In the Chart of Accounts window, right-click and choose New.
3. Select Other Current Liability as the Account Type.
4. Enter a name for the account (for example, Upfront Deposit) in the Name field.
5. Click on Ok.

Then, create an item to use when recording deposits. You'll have to ensure this is linked to the liability account.

1. Go back to Lists and select Item List.
2. In the Item List window, right-click and choose New.
3. From the Type drop-down menu, select the purpose of the deposits you collect.
4. Enter a name for the item (for example Upfront Deposit) in the Item Name/Number field.
5. Select the Upfront Deposit liability account you created from the Account.
6. Click on Ok.

After that, record the deposits you receive. I'll show you how.

1. Go to the Customers menu and choose Enter Sales Receipts.
2. From the Customer: Job drop-down list, select the customer.
3. Choose the account where you want to deposit the funds in the Deposit To field.
4. Enter the other relevant information.
5. In the Detail section, select the Upfront Deposit item you previously created from the Item drop-down list.
6. Specify the deposit amount in the Amount field.
7. Click Save and Close.

You can check this article for the next process and guide: Manage Upfront Deposits or Retainers.

Regarding correcting for the closed period, I would suggest consulting with an accountant so they can provide other options to ensure your books are updated.

Moreover, I've added these resources to help you track your customer transactions and cash flow in QuickBooks Desktop:

• Get Started with Customer Transaction Workflows
• Track your Cash Flow in QuickBooks Desktop

You can always get back to this thread if you have further questions about upfront deposits in QuickBooks. I'll be sure to lend a hand again.