Deposits/down payments

While your grasp of the concept of treating down payments as current liabilities may be correct from a purely accrual side of looking at things the fact that you are cash basis, to my mind, complicates this even further.

Now I admit I am not an expert on money received before work is performed, however, I receive rent money prior to the rent being charged.  This, in the books, is treated as a prepayment - current liability - and becomes or is applied when rent is billed.  At the end of the year is when it gets more complicated than merely receiving money without an invoice, when any prepayments (cash IN hand) has to be converted to income since on a cash basis it has been my understanding (albeit possibly off-kilter) that ALL cash received is income regardless of whether you have performed the corresponding work.

That being said, your main issue, as I see it, is the inability to grasp the entire project at a glance and to know where you and the customer stand.  In contracting I would start by using Estimates, adjust the estimate to match the signed contract (at least in our state contractors are not allowed to proceed without having presented a written proposal that includes their state-issued license number)

Now the key is Progress Invoicing, creating invoices as you go from the single estimate https://quickbooks.intuit.com/ca/resources/invoicing/converting-estimate-invoice/

And since you are cash basis https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/how-do-i-record-down-payments-and-then-later-invoice-the/00/203489 you will have unapplied cash income when you receive money without an invoice yet on the books.  As cash basis you cannot treat the down payment as negative A/R but instead should treat it as income. You can use a different income account for prepayments and then reverse the income from that account on your correct final or progress invoice (by creating a credit or entering a negative income line on the invoice once created)

Have I lost you yet?  Hope not. Let's break it down

1. create estimate (optional)

2. record down payment as income to Unearned Revenue or similar

3. create invoice (or progress invoicing) and deduct Unearned Revenue

4. collect all additional monies and apply to open invoice amounts

2. create 

@appletreeconstru 

QB only reports on cash basis, it is accrual accounting. And since you are using invoices, it is not true cash basis, it is reporting on a modified cash basis.

Basically if a deposit is refundable, it is a liability. If a deposit is non refundable it is cash income when received. A pre-payment is income when received, basically no different than a non refundable deposit.

I create the liability account for customer deposits, and a service item which link to that liability account. Use that service item on the invoice or a sales receipt and deposit the funds.

When you invoice the customer, use the deposit service item as the last item, set the qty to negative one, and enter the amount, the customer pays the balance due.

If you do not want to use a liability account for the deposits for some reason, create a liability account and name it deferred income, basically the same thing it just looks different on the balance sheet. Same process as above.

@john-pero 

John when I receive rent ahead of the due date, I post it to a deferred rent income account, then when the effective rent date comes around I charge the tenant on a sales receipt, and list the deferred income item as a negative, save the zero dollar transaction and all is right with the world. :-)

Food for thought