Tuition Payments

Thank you for posting here in the Community, @Books03.

To better assist you, could you please clarify how the prepaid tuition accounts are being recorded in QuickBooks? Additionally, can you tell me more how they enter their invoices in QuickBooks and how it affects their Balance Sheet report? A screenshot will also be a great help. 

This will enable me to provide accurate advice on how to proceed effectively. 

Thank you, and I look forward to your response.

So they do not do invoicing like they did in 2022. They pretty much input deposits into the income account vs putting in the liability account, then every month they release funds to the operating account. For example, if the tuition is $10,000 then it should be in the liability account and then released to operating account per month depending if the client pays 10/12 months so about $1,000 per month would be released. The issue is that there is just deposits with no reference so it's showing the liability account extremely high when in reality it should match? Also its giving  a negative NET income as well. I do not have the balance sheet with me to be able to share. Hope this made sense. 

@Books03 

Firstly, ask your client to run the Verify/Rebuild Data utility. Did they encounter any error message?

No I don't think its a issue with the data or the system. 

I appreciate you getting back to us with additional details, @Books03. Let me assist you in creating a journal entry to resolve the incorrect liability account balance in QuickBooks Desktop (QBDT).

Since you do not enter invoices for your deposits, there is no money movement between your income and liability accounts. This causes your liability account to reflect a balance.

To resolve this, I suggest creating a journal entry to adjust the accounts and correct their balances. Before doing so, it's best to seek guidance from an accountant to ensure your books are accurate.

To do that:

1. Go to the Company menu and select Make General Journal Entries.
2. Select the liability account on the first line and enter the amount under the Debit column.
3. On the second line, select the income account and enter the same amount in the Credit column.
4. Check the amounts and ensure they're balanced.
5. Enter a description in the memo section to know why the journal entry was created.
6. Select Save & Close.

Moving forward, you'll want to return to invoicing or enter a sales receipt to record the deposits or retainers you receive. For your detailed guide, please refer to Step 3 or Step 4 in this article: Manage upfront deposits or retainers.

Furthermore, I recommend reconciling your accounts in QBDT monthly to ensure they correspond to your real-life bank and credit card accounts.

Stay in touch if you need additional guidance in managing your business accounts in QBDT. The Community team is here to answer your queries. Take care, and have a good one.

@Books03 

Just to confirm, your client is receiving tuition payments, correct?  You mentioned "prepaid tuition' which would be correct if your client was paying tuition, not receiving it. 

If that's the case, then the tuition received is deferred revenue (liability) until recognized as income, correct?  If I'm understanding that correctly, then this seems problematic:

"They pretty much input deposits into the income account vs putting in the liability account, then every month they release funds to the operating account."

What entry is your client making to "release" the funds?  The deposit entry didn't restrict the funds in the sense of a NFP.      

We as the school receive tuition payments from the clients. Does that make sense?

@Books03 

That makes sense.  I need to know what specific entries the school is making after they receive the deposit to an income account.  You mentioned that "every month they release funds to the operating account.".  What entry are they making to do that? 

I can see a scenario where they are recording the deposit to an income account and then moving the finds with a journal entry that debits (reduces) income and credits (increases) the liability account.  Although that's not the correct entry, it could cause negative (understated) net income and a positive (overstated) liability balance, which is what they have.  

@Books03 

EDIT: I can see a scenario where they are recording the deposit to an income account and then moving the funds...

Yes absolutely it’s making the Net income look extremely low. So to fix this I think just need to make one journal entry to fix this and reconcile the liability account to the correct balance.