Hi there, I received a deposit for few open invoices and advanced deposit. I can apply the payment to open invoices but not sure how to apply to customer deposit.

Hello there, @m-demaj-neumansk.

I'll make sure you can appropriately apply or record a customer deposit to manage your income transactions in QuickBooks Online (QBO), and I'm here to guide you on how.

When you receive retainers or deposits from your customer before performing any services, they're considered your liabilities until the income is earned. They're treated as one to show that, although your business is holding the money from a deposit, it doesn't belong to you until it's used to pay for services. Once you invoice the customer and receive payment against it, you'll turn that liability into income.

To do this, you'll first need to create a liability account. It'll track the amount of the deposit you receive from your customer. Here's how:

1. Go to Settings ⚙ or Gear icon, then select Chart of accounts.
2. Click New.
3. From the Save account under dropdown, select Other Current Liabilities.
4. From the Tax form section dropdown, select Trust Accounts - Liabilities.
5. Enter a name for the account in the Account name field (for example, Retainers or Deposit) and all other info needed.
6. Set the starting date in the Starting date and opening balance section.
7. Click Save. 

Next, create a retainer item. You'll be selecting it when you create an invoice for a deposit. Here's how:

1. Go to Settings ⚙ or Gear icon, then select Products and services.
2. Click New.
3. From the Product/Service information panel, select Service.
4. Enter a name for the new product or service item (for example, Retainer).
5. From the Income account ▼ dropdown menu, select the liability account created above.
6. Click Save and close.

Once you're done, you can begin to create your invoices or sales receipts for the deposits you received. Then, turn them into credits on an invoice and receive it like a payment.

Please feel free to visit this article for the complete guide: Record a retainer or deposit.

Also, you may want to check out these articles as your reference to guide you in case you need to personalize your invoices and other sales forms and receive invoice payments in QBO:

• Customize invoices, estimates, and sales receipts in QuickBooks Online 
• Record invoice payments in QuickBooks Online

Keep me posted on how it goes in the comments below. If you have other concerns about customer deposits or questions about managing sales and income transactions in QBO, I'm always ready to help. Take care, and have a great day, @m-demaj-neumansk.