Welcome to the QuickBooks Community, @dtg-wpi.
To record a prepayment, you can set up a deposit or retainer process in QuickBooks Online. This will indicate that although your business is holding the money from the customer, it doesn't belong to you until it's used to pay for services.
When you create an invoice and receive payment against it, the liability will turn into income. Please follow the steps below to record a prepayment.
First, to track the prepayment you receive from the customer, you'll need to create a liability account:
- Go to the Chart of Accounts menu, click the New button.
- In the Account Type field, select Other Current Liabilities.
- In the Detail Type menu, Client Trust Accounts - Liabilities.
- Enter a name for the account.
- Choose an option from the When do you want to start tracking your finances from the is account in QuickBooks? dropdown list. Then Save and close.
Then, create a retainer item:
- Go to the Sales menu, then click Products and Services.
- Select New and choose Service.
- Type a name for the new product or service item (ex. Retainer).
- In the Income account ▼ drop-down menu, select Trust Liability Account. Then Save and close.
Once done, you can refer to this article link to apply prepayment to the invoice: https://quickbooks.intuit.com/learn-support/en-us/business-accounts/record-a-retainer-or-deposit/00/....
You can also trace how much of a retainer or deposit you have for each customer from the Balance Sheet report.
Here's how:
- Go to the Reports menu and select Balance Sheet.
- From the Report period field, choose All Dates. Then Run report.
- In the Liabilities section, locate your trust liability account.
- Select the amount shown for the account to open the Transaction Report for that account.
- Select Customize, click Rows/Columns.
- In the Group by ▼ drop-down menu, select Customer. Hit Run report.
Keep in touch with me if you have further questions. I'm always here to help. Stay safe and take care!
