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ebtihal
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P & L. Why?

I send QB invoices to customers (usually clients that I record music for in my recording studio).  When they pay me (usually via check or Paypal), I tell QB that they've paid to close out the invoice.  At which point QB puts that money in A/R.  I wish it didn't, I wish it could just corroborate with the bank/Paypal deposits.

Worse still, these transactions are hidden in my A/R, as my P & L reports don't see them as income.   So each time I mark them as paid, the amount goes into the abyss of A/R.

How can I get these invoice transactions to show up as Income on my P& L like all my other non-invoice transactions? 

P.S. I use the cash method (I tried accrual but it seemed more problematic and unnecessary, I'm a sole proprietor).  


Solved
Best answer May 31, 2019

Best Answers
ObviousDWest
Level 1

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P & L. Why?

Many of the responses to this question seem to have overlooked the fact that the OP said they are using cash-basis. With cash-basis there isn't really supposed to be accounts receivable or accounts payable. Income is earned when funds are received, not when billed through an invoice.

 

What I've found is that QBO does have a AR account, some reports make reference to it, and you can look at it in the chart of accounts. So. Lots of opportunity for confusion.

 

What I do is create an invoice, and send it out (I like that QBO does that legwork for me). When I receive funds (e.g. through direct deposit) from a customer, instead of "add"ing the transaction as a deposit, I first go to the invoice, and do "receive payment". When I go back to the Banking page and look at transactions, it offers to match the bank transaction with the "Payment" I made.

 

After doing all that, on a P&L, I will see income reported. When you click on it, you'll be taken to the Invoice (even if it was from only a partial payment), not the deposit, or whatever transaction shows in the bank account register. Note that I don't have to do anything to the AR account. I suspect it is being manipulated behind the scenes by QBO. But it doesn't show up in P&L, nor Balance sheet. I get the appearance of real cash-basis accounting.

View solution in original post

26 Comments
qbteachmt
Level 15

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P & L. Why?

What I see is Not Correct. Let's review:

You charge a Service, so that is linked to Income. This will control the flow of the data to accounts.

You use it on Sales Receipt = the date of the sale is also the date of the payment.

Or, you use it on Invoice = This is Income, but not yet a Paid sale. This creates the AR. Your Item is not the AR. The function of using Invoice creates an Unpaid sale, which is AR.

Then, you get paid; this is Not a Deposit. You should never see DEP. This is a Payment, when you used Invoices. Or, you already got the funds from the Sales Receipt. The only time you would see DEP is if you Batched all the payments and your sales receipt by sending the payment data to Undeposited Funds, to be held until the banking shows up.

So, it is like this:

Sales invoice (income here) ==> AR ==> Payment arrives ==> Held as UF ==> Banking happens

That's why DEP never shows Engineering Fee Income. That is Settlement of the sales, and not your Income event.

Let's break this down a bit:

"At which point QB puts that money in A/R."  I wish it didn't, I wish it could just corroborate with the bank/Paypal deposits."

It is Neither AR nor Banking; you need to edit your Charge items and link them to Income and let QB move existing data for you.

"Worse still, these transactions are hidden in my A/R, as my P & L reports don't see them as income."

You will always see Invoice as the Transaction Type that creates Income. But the income doesn't show on Cash Basis for unpaid sales; it shows on Accrual Basis for the date of the invoice, even if Never paid. For cash basis, it shows that invoice for the date of the Payment, on Cash Basis, but you still see the Invoice. The invoice (the Sales) is the Income transaction.

"I wish it didn't, I wish it could just corroborate with the bank/Paypal deposits."

If you use the banking download, never let this Add to the file; these are not DEP, if you never yet processed payments. They are Matched to open invoice. Or, Matched to the amounts still sitting in UF.

And you should be managing PayPal as its own Bank account in your system, if they hold your funds and you incur fees there. That way, a sales receipt or Invoice Payment would post to the PP bank, not to US, because they are posted Individually in reality. Bookkeeping matches reality. Then, settlement to Real Checking from PP is a Transfer; this is not income again. It is you, moving your own funds around. Your PP fee is a Check from the PP bank. You use the PP statement to reconcile your PP bank in this file.

"P.S. I use the cash method (I tried accrual but it seemed more problematic and unnecessary, I'm a sole proprietor)."

You run the Reports on Both Basis, to keep on eye on things. You are using invoice to Anticipate payment will arrive, because you have in fact charged the people. That is fine.

Cash or Accrual is a Tax Reporting perspective. In the accounting, we use the tools that meet our needs.

I have attached some images that are from PC desktop, but they should be helpful to you.



rcooper
Level 1

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P & L. Why?

unsure whether this is the worst answer ever or if QB sucks that much....
qbteachmt
Level 15

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P & L. Why?

@rcooper

Is there something you need help with? Because your Response here doesn't seem to relate to the topic or the issues we dived into here.

This topic indicates someone has a Setup error in their file. And people are learning how to use this program. The Program is not the issue.
rcooper
Level 1

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P & L. Why?

I have exactly the same problem as this user "Paid invoices go to Accounts Receivable".  I want paid invoices to debit checking and credit A/R - not increase A/R by going into a "Special Undeposited Funds Account" - what the hell is that account?
qbteachmt
Level 15

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P & L. Why?

"I want paid invoices to debit checking and credit A/R"

Let's review:
The Invoice is what hits Income; the same charges on a Sales Receipt also hit income. The difference is that AR = Unpaid sale. So, the PAYMENT, not the invoice, that comes along later, is what becomes part of the Banking. Like this:
Income (offset to Banking or UF from Sales Receipt)
or,
Income (offset to AR) <== Unpaid Sale, no funds yet.

If you are familiar with debits and credits, this is Debit Funds (Sales receipt) or Debit AR (because it is Unpaid), and both will credit Income, for your sale.

"- not increase A/R"

Now we expect a payment. That will satisfy the open AR balance, and results in Money. So, this is Debit Funds and Credit AR. This Credit to AR offsets the original Debit to AR. That is what makes a customer account be 0, once they Paid.

"by going into a "Special Undeposited Funds Account" - what the hell is that account?"
That is something You Control. This is how you show, for instance, I just opened the mail and have 20 checks to process that will end up at the bank as One Total. I do not want individual deposit entries; I want One. But I need to process 20 individual checks, so they flow to UF, waiting for me to select all 20 are part of the Batched Total, and the deposit date might be different than the Payment Date. This week, in the US, Wed was a Holiday. To be fair to you, my customer, I want to show I got your check on Tue July 3, and processed your payment Timely. But the Deposit function is where I selected all 20 checks for Banking deposit on Thurs, July 5. To be fair to you, the Deposit date is NOT your payment date, and we need a process that reflects these facts. Undeposited Funds = a Holding account, for that delay, for reasons of wanting to make a batched total deposit, for purposes of waiting for electronic settlement to banking, a merchant account processing service, etc.

What this topic revealed is that the Sales Items were linked to Bank, completely skipping that Sales is your income (typically). Sales or Charge items might be income or liability, such as Sales Tax is liability.

The point is to make sure what you list on Sales Transactions explains the WHY people are sending money. It isn't just money to banking. It is Money as Income, or revenue from sales, or prepayment or sales tax liability. The Why is part of the accounting and that is happening on your Invoice and your Sales Receipts.

The rest is just Banking.
qbteachmt
Level 15

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

"Your income account is not set correctly. Check the box "this service is performed by a sub contractor" Now you will see where you can assign an expense account on the cost side and an income account on the sales side."

You would do that when this is something you Incur, Charge, or for Both events. Otherwise, all of your Fee items are linked to Income. You showed an image with one linked to AR and this is the Error.


SkinnyRaven
Level 8

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Check the items used on the invoice, the cost side should be assigned an expense account or COGS, and the sales side assigned an income account.

ebtihal
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

That's what my accountant had suggested.  But I checked that, and it looks correct to me….maybe you can see what’s wrong.  
In the Item List (see “Item List” screenshot) I use the Item Name I made called “music consulting,” which covers just about everything I do in the studio.  As you can see, the Account this item is attached to is “Engineer, Consultant.”   If I get paid by a client that I did NOT invoice, their deposit shows up in a Downloaded Transaction from my Bank, and when I match it and enter each transaction’s details to my QB bank account, “Engineer, Consultant” is the Account I use for any recording client (see “Recording Client Bank Account Entry” screenshot).  This works fine for everything but payments from Invoices.  
When an Invoice is paid, it gets recorded into A/R, where there appears to be nothing in the “Item” field (see “Acc Rec.” screenshot). And if I double-click on it to edit it, it simply opens the Invoice, which has “music consulting” listed in the Item field (see “Invoice Example” screenshot).
So I don’t understand what A/R needs to see that I’m not already telling it.
btw, hanks for the quick response, SkinnyRaven.  
(attached the files to the initial post as I couldn't see a way to attach them to this comment.)
SkinnyRaven
Level 8

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

That looks correct from what I can see. You will not see items listed in the A/R register. However on your P&L report under income you should show a line item "Engineer, Consultant" with a total dollar amount. Are you not seeing this on the P&L report?
ebtihal
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Yes, the P & L does show a line item "Engineer, Consultant," it's one of the larger figures of income in my business, as its composed of all payments from recording studio clients.  However, if it was a client I invoiced (I only invoice maybe 2/3 of my clients) and I mark it as paid, that amount on the P & L decreases.  e.g. if I invoice a client for $500, and they pay it, and I mark as Payment Received, my "Engineer, Consultant" is reduced by $500 and so is my total income.  Weird, right?
SkinnyRaven
Level 8

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Thats not right. Open your item in the edit window and confirm the cost and sales assignments.
ebtihal
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

You mean this?  (see "Edit Item" attachment added to initial post---yes I edited out the rate for this screenschot, but normally there's a default rate there).
SkinnyRaven
Level 8

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Your income account is not set correctly. 

ebtihal
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Thanks, Skinny Raven.  Finally circling back to this to solve it. Still a bit perplexed.  Why would I check that this service is performed by a subcontractor when it’s not- it’s performed by me, the sole proprietor?
And what should the expense account be?  My main biz checking account?   I mean, I can’t ever see using an invoice for “purchases” as I’m not that kind of a biz.  I’m just a recording studio owner who bills artist clients through invoices.  The fact I have to lie about it and say I’m using a subcontractor and link it to an expense account leads me to believe the QB Invoicing system is not for me.  Especially if invoices can’t “shake hands” with my downloaded bank reports as qbteachmt suggests (or at least that’s what I think he/she suggests…I can’t make sense out of 90% of what his/her entries say, regardless of how many times I circle back to read them).
qbteachmt
Level 15

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Right here: "Why would I check that this service is performed by a subcontractor when it’s not- it’s performed by me, the sole proprietor?"

It doesn't have to be checkmarked, then. But you NEVER link an item to AR; you are going to put it on a Sales Receipt, or an invoice, and that item is your Income. Using an invoice is creating AR, already.

"And what should the expense account be?  My main biz checking account?"

You seem to be confusing Source of funds and the Reason or the Why funds left. I am giving you an attachment that is a handout I use to teach the Basics of the account types. When someone mentions assigning to Income, that means Revenue, not Bank. Bank would be the Destination, but Income is the Reason. When someone mentions "that is an expense account" that means Expense, not Bank. Bank would be the Source of the Spending and "office supplies expense" is an example of the Reason funds are being spent.

"I mean, I can’t ever see using an invoice for “purchases” as I’m not that kind of a biz.  I’m just a recording studio owner who bills artist clients through invoices."

Let's review: you show using DEP for income; that would be Sales Receipt using that same Service item for what you did. The same thing that you would list on an invoice, is listed on a sales receipt.

Sales receipt = I am also already paid for this date.

Invoice = I am charging them, it isn't paid yet, and the funds will come separately and later.

Both of these are your Sales processes. Both of these result in Funds to Banking.

"The fact I have to lie about it"

It's not a Lie. The recommendation was to set it up as a Provision. You don't have to do anything anyone tells you, here. We are explaining the tools. The point is, never link to AR because you overlooked Income. That item for "what I did for you, that you owe me for" is your Income activity.

"and say I’m using a subcontractor and link it to an expense account leads me to believe the QB Invoicing system is not for me."

Do not get out of control over this. A text based forum means we work together and back and forth, to narrow  down functions you use, how you use them, functions you didn't realize work better for you once we learn what your needs and operations are.

"Especially if invoices can’t “shake hands” with my downloaded bank reports as qbteachmt suggests"

Your Banking info is Verification. A Sales Receipt or a Payment against in invoice will be part of the Banking. We all use these tools.


Did you ever see the video tutorials and the Support articles for your product:

haskenazi1
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

You must be entering something incorrectly. 

When you create the invoice, and before the client pays  that is when the money should go into account receivables. When it is paid, and once you match the bank transaction to the open invoice  it will remove the balance from receivables. The accounts receivables is an asset so it was already on the balance sheet before you got paid . The payment only will affect your cash but you wouldn't see assets increase further. The cash asset would increase and receivables asset will decrease for a zero net change there..

mommie-salami
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

I am having some similar issues confusing income accounts (from chart of accounts) with bank accounts...but I am muddling through... I will post a question relating to my specific issue as soon as I can articulate it correctly. in the meantime, I am VERY INTERESTED in the information you shared with the recording studio business person. Was it a link or pamphlet? Could you share again please, or tell me where to find it? Thanks in advance

ObviousDWest
Level 1

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Many of the responses to this question seem to have overlooked the fact that the OP said they are using cash-basis. With cash-basis there isn't really supposed to be accounts receivable or accounts payable. Income is earned when funds are received, not when billed through an invoice.

 

What I've found is that QBO does have a AR account, some reports make reference to it, and you can look at it in the chart of accounts. So. Lots of opportunity for confusion.

 

What I do is create an invoice, and send it out (I like that QBO does that legwork for me). When I receive funds (e.g. through direct deposit) from a customer, instead of "add"ing the transaction as a deposit, I first go to the invoice, and do "receive payment". When I go back to the Banking page and look at transactions, it offers to match the bank transaction with the "Payment" I made.

 

After doing all that, on a P&L, I will see income reported. When you click on it, you'll be taken to the Invoice (even if it was from only a partial payment), not the deposit, or whatever transaction shows in the bank account register. Note that I don't have to do anything to the AR account. I suspect it is being manipulated behind the scenes by QBO. But it doesn't show up in P&L, nor Balance sheet. I get the appearance of real cash-basis accounting.

View solution in original post

Carolexx
Level 2

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

I also have this problem and it makes no sense to me whatsoever.  I screwed up all of 2018 because AR and undeposited funds were totally off causing huge totals in each account even though I reconciled.  ( how can you reconcile if QB has your deposit sitting in some AR account???)  When I import a deposit, why doesn't AR just recognize this and reduce the balance?  that makes sense.  I am just starting to put transactions into 2019 and I don't want this happening again.   I also have to delete expenses that were charged to a job because those expenses are included in the invoices making more transactions in AR and therefore making AR even bigger.  These expenses are included in our invoice.  The CPA did an enormous journal to take the unwanted charges out of AR and begin 2019 with a zero balance.  Now I need some step by step instructions on how I am going to keep AR and undeposited funds from becoming enormous again.  Does anyone have those steps?  No one seems to know how professionals invoice and all I see are instructions for inventory type businesses.  so here is the deal.  I prepare an invoice that includes the expenses that were on T-sheets.  what are the steps I have to take to keep AR and undeposited funds correct?  Just delete the fees before reconciling?  If I do that, how are these expenses charged to their jobs?  

Kristine Mae
QuickBooks Team

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Let's get them sorted out, Carolexx.

 

Regarding the deposit, it looks like it wasn't linked to the invoice. You'll have to link it manually. I'll show you how:

  1. Open the deposit, then change the account to Accounts Receivable.
  2. Click Save & Close.
  3. Open the invoice, then click Receive Payments.
  4. Click Apply Credits, then go to the Credits tab.
  5. Select the deposit, then click Done
  6. Click Save & Close

This should keep both A/R account and Undeposited Funds accurate.

 

Let's go over to the expenses charged to jobs. You can enter a billable expense transaction. This occurs when you perform work on your customer's behalf. You can easily track billable expenses so your customer can reimburse them when they receive their invoice.

 

Here's how to create a billable expense:

  1. Click Banking, then go to Write Checks.
  2. Fill in the necessary fields.
  3. Check the Billable box, then select the customer.
  4. Click Save & Close.

Then, create an invoice. Here's how:

  1. Click Customers, then select Create Invoices.
  2. In the Billable Time/Costs window, click Select the outstanding billable time and costs to add to this invoice?.
  3. Click OK.
  4. In the Choose Billable Time and Costs window, go to the Expenses tab.
  5. Select the billable expense, then click OK
  6. Click Save & Close.

Get back to this thread if you have more questions. We're here to fill you in. 

wrightboys43
Level 1

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Hi - I am now having a somewhat similar issue in Quickbooks Desktop Pro 2020. Some of the Payments I have Received on invoices are not showing up in my Undeposited Funds account in order to 'deposit' them to my account and have them visible and included on my check register.  When I open up Receive Payments I'm able to find them by clicking through until I get to the right date, but there's no option for me to change the account.  These payments are not showing up on my Income Tracker, and when I open up the Accounts Payable register they are there but I'm not able to edit which account they are assigned to. 

 

Some of the invoices have line items that state: "Services" (type:service, account:delivery) and some have line items that state "Delivery" (type: service, account delivery).

 

I've been trying to research how to transfer or switch them over to Undeposited Funds and then deposit them, but I haven't had any luck.  Can you advise how I change these payments so they go into an Undeposited Funds account?

 

Thank you,

JenoP
QuickBooks Team

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

It's possible that the payments are directly deposited to the bank register when receiving them, wrightboys43.

 

This is also the reason why you can no longer change the account since they're already posted in your register. Let's make Undeposited Funds the default account when receiving payments in QuickBooks Desktop. Here's how:

 

  1. Go to the Edit menu and select Preferences.
  2. Click Payments in the left-hand menu and proceed to the Company Preferences tab. 
  3. Check the Use Undeposited as a default deposit to account box. 
  4. Click OK

Here's another guide for more details: Deposit payments into the Undeposited Funds account in QuickBooks Desktop.

 

Let me know if you have follow-up questions. 

 

 

wrightboys43
Level 1

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

HI JenoP,

 

Thank you so much for following up so quickly!  The "Use Undeposited as a default deposit to account" is checked in my company preferences, I think this was set as the default when we re-purchased and redownloaded Quickbooks Desktop Pro in June.  My current issue is that there is a large amount of invoices from March 2020 to June 2020 where the payments did not go into this account, they went into Accounts Receivable, and they do not show on the check register.

 

I've noticed now that all the invoices with 'missing' payments are a different invoice template - would this somehow make the payments go into the accounts receivable register instead of Undeposited Funds?  This older template is not something I can edit, even though there's hundreds of invoices I can't select this template to edit or even to create a new invoice.  (I do have the option to change these invoices to a current template we have in Quickbooks).  I think these were generated through our Quickbooks Online account when we were working remotely during the Covid-19 shut down.  I've gone into List > Templates and also Edit > Templates to see if I can change which account these are linked to but I haven't found where I can change that.

 

Would I have to delete these payments that went into Accounts Receivables and change the invoice template to match our current template and then receive the payment again so that they are all in the same place?  Or do I create a manual duplicate in the check register for these payments?  Would this skew the Accounts Receivable summary to show more is due than is actually due when I print a report?

MariaSoledadG
QuickBooks Team

Paid invoices go to Accounts Receivable, and once there they no longer show up as Income on my P &amp; L. Why?

Let's find out why payment isn't showing up on your register, wrightboys43.

 

Payments only show up on the bank register if you've selected a specific account when receiving a payment. Since you've set Undeposited Funds as the default account, that's the reason why you're not seeing the payment in your bank register. 

 

You'll want to make sure that you've selected the correct account when receiving a payment. I've attached a screenshot for your visual guide.

 

Also, if you want to check which account is your invoice payment link to, you can go directly to the Customer Center. Here's how:

  1. Click Customers on the upper menu.
  2. Select Customer Center.
  3. Locate for the payment and check the Account column for the account information. Usually, payment will show after the invoice.

Once you're able to follow these, there's no need for you to delete payments or change a template to the current one. You can also read this article form more information about combining payment in QuickBooks: Record And Make Bank Deposits In QuickBooks Desktop.

 

You'll also want to add and bank bank transactions after you've received the payment: Add And Match Bank Feed Transactions In QuickBooks Desktop.

 

Let me know if you need anything else. Remember, we're always here to help you.

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