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PineconeDB
Level 1

Best way to deduct from a client deposit

Hi,

 

New here (which is probably obvious from this question),  but I have received a deposit from the client for work to be done on a multifaceted project. Some of that work has been done and invoiced for.

 

What is the best way to deduct that invoice amount from the deposit account that is reflecting the deposit (which is set up as a liability account as per the advice here) so that the invoice can be shown as paid?

 

Thanks!

2 Comments 2
Kristine Mae
Moderator

Best way to deduct from a client deposit

I can guide you on how to link a deposit to an invoice, PineconeDB.

 

Just follow these easy steps:

  1. Open the deposit, then change the account to Accounts Receivable.
  2. Click Save and close.
  3. Open the invoice, then click Receive payment.
  4. Under Credits, make sure to choose the deposit.
  5. Click Save and close.

The invoice will now show as paid.

 

I've attached some screenshots as your reference.

 

 

 

 

 

 

 

 

If you have other concerns, you're always welcome to post in the Community. Have a good one!

qbteachmt
Level 15

Best way to deduct from a client deposit

@Kristine Mae

 

You NEVER make a change to the existing data, once it is entered. You just recommend a change to their Historic Financial records.

 

@PineconeDB

 

"Some of that work has been done and invoiced for."

 

The way to Apply this is to use a customer Credit Memo (refund transaction) but you are not Giving them money; you are Applying it to the invoice.

 

"What is the best way to deduct that invoice amount from the deposit account that is reflecting the deposit (which is set up as a liability account as per the advice here)"

 

Don't follow Accounting Guidance from the web. You need to work with your own CPA to know if you are Allowed to hold that as Liability. A Cash Basis entity would typically need to use a Service Item or Other charge linked to Income, for managing Prepayments and the application of the prepayment on a credit memo and the resulting refund, if any.

 

An Accrual Basis entity would typically be allowed to hold Liability.

 

No one on the internet knows your Accounting Requirement. You need to Confirm if this is able to be held as liability or not.

 

You use the Prepayment item on a Sales Receipt when you first get paid. That is either Income when you get it, and the application of it on a credit memo is similar to a Discount or reduction of the Actual Sale (since you already claimed the prepayment as income). For a Liability, the use of the prepayment item on the sales receipt increases Liability and the use of it on a credit memo reduces liability for that customer name.

 

@Kristine Mae

A Deposit is never AR, because that just made Negative AR, a Backwards Asset, and bypassed the Customer functions entirely.

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