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TK3
Level 1

How do I post a payment for a customer deposit as a liability?

How do I correctly account for our sales and communicate with our customers under the following sample scenario of a representative transaction for our business?
  • a customer books a taxable service (say, at a $1,000 cost) and accepts that we will charge her a $200 taxable non-refundable deposit at the time of booking. The booking form includes the customer's credit card informaton.
  • when we receive the booking, we use the credit card information to manually charge the taxable $200 deposit. At this point, we would like to (a) post the $200 as a liability and the $X in tax as a tax liability (not the default tax payable account because we wouldn't owe these taxes at this point, we're just holding them), and (b) send the customer a quote that shows the $1,000 (+ tax) cost, minus the $200 (+tax) deposit, equals $800 (+tax) outstanding. But we can't have the accounting system post the $800 (+tax) remainder as revenue/negative account receivable because we have not performed the service yet.
  • 10 days before we perform the service, we charge the $800 (+tax) final payment to the customer. This needs to be posted as a liability (unearned income/revenue), not as revenue/income, because we haven't performed the service yet. We would also like to send the customer an updated estimate showing the $1,000 (+tax) cost, minus the $200 (+tax) deposit, minus the $800 (+tax) final payment, equals $0 outstanding.
  • Then, on the day we perform the service, the $200 deposit and the $800 final payment should be moved from the liability accounts to the revenue/income account and the tax on those payment should be moved to tax payable.

I haven't found an easy way to accomplish this, particularly because we can't create an invoice until the day we perform the service (to prevent QB from posting sales/revenues and accounts payable before then). Does anyone have any thoughts on this?

Thanks in advance. 

Solved
Best answer 10-15-2018

Accepted Solutions
Level 15

@ TK create a service item, in the products & services li...

@ TK

create a service item, in the products & services list, called cust-dep ( if you accept both refundable and non-refundable deposits I would label this one cust-NR-deposit) and select the income account you want it to post to on the item screen

use a sales receipt to accept the deposit using the cust-dep service item and deposit the funds

when you invoice list the items for the sale, a sub-total, and the service item cust-dep  and enter the qty as a negative one, and enter the amount of the deposit in the rate block


View solution in original post

9 Comments
Level 15

@ TK create a service item, in the products & services li...

@ TK

create a service item, in the products & services list, called cust-dep ( if you accept both refundable and non-refundable deposits I would label this one cust-NR-deposit) and select the income account you want it to post to on the item screen

use a sales receipt to accept the deposit using the cust-dep service item and deposit the funds

when you invoice list the items for the sale, a sub-total, and the service item cust-dep  and enter the qty as a negative one, and enter the amount of the deposit in the rate block


View solution in original post

Level 3

Good day TK! Thanks for reaching out. I can provide some...

Good day TK!

Thanks for reaching out. I can provide some steps that will work in QuickBooks, however, if you need to make sure you're doing the best accounting practice, please consult with your accountant.

We call this Upfront Deposit. To record this, you will go through the following steps. You can also check out the screenshots below:

  1. Set up a new account in the Chart of Accounts. Type and Detail type would be Other current Liabilities. 
  2. Set up a new item in the Products/Services List. Check the taxable box, and use the new account for the Income account.
  3. Record the Upfront Deposit via a Sales Receipt, using the newly set up item. Select the appropriate sales tax.
  4. Create an invoice with the whole amount. Make sure you also indicate the sales tax.

To apply the Upfront Deposit, add the item in the invoice and enter the rate/amount as negative. This will decrease liability account and reduce the balance in the invoice.

Have a good day.

Level 15

saying set up an item is not enough, what type of item is...

saying set up an item is not enough, what type of item is kind of critical
Level 1

Re: Good day TK! Thanks for reaching out. I can provide some...

Hi - I had this problem as well, and followed the instructions listed below. I am leaving all the payments and customer information in "estimates" and not an invoice, just so I can provide a receipt for the payment made if requested by the customer using the same cust-dep account on the estimate. The problem now is when I pull the sales tax liability report, the item shows up as revenue, (non-taxable ) but still shows up as revenue. I will have a problem when I report to the state and pay the sales tax because this is not revenue, not until the final payment is made. Why is this such a hard solution for QB, as it is not an uncommon event.

QuickBooks Team

Re: Good day TK! Thanks for reaching out. I can provide some...

Hi there, S-Ponder,

 

An estimate is a non-posting sales transactions in QuickBooks. Thus, it won't reflect on your sales tax report.

 

QuickBooks will pull up the tax amount to reflect the return based on the sales receipt date. What you need to do is create an invoice on the same day you've finally receive the payment. This way, you'll get the correct reporting of your sales tax.

 

I'll keep my eyes on this post while waiting for your respond.

Highlighted
Level 1

Re: Good day TK! Thanks for reaching out. I can provide some...

Yes, it shows up under the sales tax liability report under non-taxable revenue.

Moderator

Re: Good day TK! Thanks for reaching out. I can provide some...

Thanks for getting back to us, S-Ponder.

 

As mentioned by my colleague above, an estimate shouldn't reflect on your sales tax liability report since it is a non-posting transaction. In this case, I highly suggest contacting our Phone Support team so they can pull up and check your account using their screen-sharing (remote acces) tool and investigate this further.

 

Here's how to reach them:

 

  1. In your QuickBooks Online (QBO), click the Help (question mark) icon at the top right.
  2. Select Contact Us at the bottom to connect with our live support.

 

Just in case, I'll be adding this article for future reference: Manage sales tax payments.

 

Please let me know in the comment if you have any other issues or concerns. I'm more than happy to assist. Have a great weekend!

Level 1

Re: Good day TK! Thanks for reaching out. I can provide some...

I am sorry if i wasn't clear - it is the sales receipt that is posting in sales tax revenue and not the estimate. Maybe I am not sure how this will play out in the end, but I "see" the sales receipt (which is the prepayment made by a customer) posted in non-taxable revenue the month received. I report the non-taxable revenue to the state in total.  The end being the customer pays in full, I create an invoice and use the credit of prepayments made by that customer to pay the invoice. Let's say it is now it is a taxable sale, recognized income. What does that do to the reporting in sales tax liability. 

Doesn't it inflate my non-taxable revenue or do I have to make adjustments of reporting to the state?

QuickBooks Team

Re: Good day TK! Thanks for reaching out. I can provide some...

It's nice to hear again from you, @S-Ponder.

 

A sales receipt is used to record your customers' immediate payment and you've received the payment in full. Also, you can apply upfront deposit or retainer as payment on the invoice. This moves the deposit from the liability account to your income account.

 

I can see in here that you have a related post about tracking and applying prepayments in QuickBooks. I'd recommend following the steps provided in this thread: https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/re-generally-you-should-rec....  

 

You can also check this article for more detailed instructions: Manage upfront deposits or retainers.

 

Meanwhile, the sales tax liability report summarizes your sales tax liability (the sales tax you've collected and currently owe to your tax agencies. It includes only those statement charges you entered while sales tax was turned on. If the sales transaction you're using is non-taxable but the specific line item included on it is taxable, you'll still it listed in your sales tax liability report.

 

I'd suggest consulting with an accountant or a tax-professional for other options in tracking your sales tax.

 

Feel free to leave your comments below if you have other questions. I'm always here to help.

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