Why are deposits credited A/R that are later linked to invoices via a payment marked as "Unapplied Cash Payment Income" on my P/L report?

Thank you for posting in the Community, @Clayton-Andrews.

This account is for cash-basis reporting. You received the payment, however, it was not applied to any sales form. If you receive the deposit today and invoice it at a later date, it will be unapplied until the date the invoice hits the books.

You can refer to this article for more details: What's Unapplied Cash Payment?

Let me know if you have other questions. I'll be around to help. Have a nice day!

This is how it went down:
I get a combined deposit from multiple sources, so I split it up, but to do that I have to categorize a portion as my customer's Accounts Receivable. I then go over to my customer's invoices and see the deposit as a credit. I then take this deposit and with a payment link it to the invoice. The invoice is marked as paid. However, that deposit still shows as "Unapplied".

Unapplied cash payment income may appear on your report if:

• A customer prepaid you and you recorded the payment before creating the sales form (invoice or sales receipt).
• You entered payments without matching them to sales forms.

To begin, let's run the Open Invoices report to locate the transaction posted as payment. This way, we can identify the right solution to clear the Unapplied Cash Payment Income on your P&L report.

Here's how:

1. Select Reports.
2. In the Find report by name field, enter Open Invoices.
3. Set the report period, then select Run report.
4. In the Transaction Type column, locate a transaction listed as a Payment.

After that, check if the payment matches an open invoice or not. To correct it, please refer to Step 2 in this article if you see a match, or follow Step 3 if there's none: Unapplied cash payment income on your profit and loss.

Once done, run your Profit and Loss. It should clear the Unapplied payment income.
 

Should you have questions, leave a message for further assistance. I'm always here to help. Take care!

I received a payment before the invoice was created, the invoice was created later and then a payment linking the deposit and invoice together was made. The invoice reads paid, why does it think this deposit was unapplied, if it was used to pay that invoice?

Hi there, @Clayton-Andrews.

In addition to my colleague IntuitLily provided above, It'll show as Unapplied if the product or service item on the invoice is mapped to a bank account type.

Here's an article you can read to learn more about the Unapplied cash payment: What's Unapplied Cash Payment?

Then, to help you resolve the Unapplied cash payment, you can follow these steps:

1. Sign in to your QuickBooks Online (QBO).
2. Go to the Reports menu.
3. Type in Open Invoices in the Find report by name field.
4. Set the report period and click Run report.
5. In the Transaction Type column and locate a transaction listed as Payment.

I've got you this article for more detailed steps: Unapplied cash payment income on your profit and loss.

Also, I'm adding this article that can guide you link a deposit to an invoice.

You can always get back us if you need more help managing your invoices. We're always here ready to help.

All of my invoices are marked as paid and they are selling "Income" items. My P/L report is *actually* correctly calculating the "Income" account  and then putting the same money in "Unapplied", it somehow thinks I am making more money then what was added to A/R in the first place.

To put it another way, when I put a deposit into A/R and then later link it to an invoice, it is *always* keeping that deposit as "Unapplied", even though I am selling an "Income" item and the invoice is marked as "Paid" and the calculation for that income account is correct in my P/L.

Thank you for providing details, @Clayton-Andrews.

Let's check the dates to verify why this is under unapplied income. First, you'll need to view the deposit date (the date you received the deposit from the bank). Then, check the invoice date (when you created the invoice). Lastly, the date of the invoice and payment was linked.

When you run a P&L report, this will show as income if the period date selected includes the date range for the deposit date, invoice date, and the date wherein the payment was linked. 

However, if you run a P&L report before the period where the payment was linked, this will show as unapplied income.

The Community always has your back, and assistance is just a post away. I hope you have a fantastic day!

Thank you for taking the time to help me with this.

I have lots of examples, but here is one:

Deposit: 2/15/19

Invoice: 2/16/19

Payment linking deposit to invoice: 2/16/19

The P/L report I am looking at is for *all* of 2019 (last year).

This amount shows up correctly in my Income accounts, but also in my Unapplied Cash Payment Income.

Thanks for the additional information, Clayton-Andrews. 

Unapplied Cash Payment Income account is automatically created by QuickBooks if your report is at Cash basis. Manually created a transaction (Deposit or Check) affecting the Accounts Receivable account flows through this account. It helps you track transactions that are unapplied. 

When you drill-down to the report a deposit will show as positive and will only offset if it's applied to sales transaction, like the Invoice > Receive Payment. It'll show as zero if all prepayments are linked and paid through a sales transaction. A negative on the other hand, if you created a Check, and positive if Deposits aren't associated to a sales form. 

The article attached by my colleagues provides further details on how the Unapplied Cash Payment Income works. 

Let me know if you need anything else. 

All of my invoices are correctly marked as paid, but the deposits used to do that are still categorized as unapplied on my P/L. These deposits were not manually made, they were categorized on deposits in my bank account. I then attached the deposits to invoices that sell "Income" items and the income is correctly registered, on my P/L. However, the deposit still shows as unapplied.

Let's review again your P/L report, Clayton-Andrews.

If the total unapplied cash payment shows zero, it means that the deposit was successfully linked to your invoices.

In addition, if it shows a positive amount, that means that the deposit isn't link to the invoice. Possible reason for this is that there's a different payment that was applied to the invoice.

Let's open the invoice so we can review all the linked transactions. Click on the hyperlink under the word Paid. It'll route you the payment transaction.

Make sure that you've checked the deposit under Credits section. Then, select Save and close.

Comment again if you need further assistance. Have a great day!

The deposits listed in my Unapplied income are correctly attached to the proper invoices with payments. They show up in my income section and are properly credited

Here is the deposit that is unapplied:

Here is the payment it is being applied in. The income account reflect this.

The invoice is marked as paid, the deposit is still Unapplied.

Thanks for getting back, Clayton-Andrews.

In the report, you should be able to see another transaction that'll offset the balance. Also, make sure that the total is zero.

Here's another example:

If you can see this, it means that this deposit was successfully applied to the invoice.

Reply again to this thread. I'll be right to help.

Nope, the report does not have another transaction. That deposit is counted as Unapplied even though it was applied with a payment and the income account was credited. My income account has the amount from the invoice *and* the unapplied has the amount from this deposit, so Quickbooks thinks my income is 2x what it was.

Thanks for getting back to this thread, @Clayton-Andrews.

When you deposited credited accounts receivable and linked it to the invoices, but the payment is applied before the invoice date. The system will tag it as Unapplied until the invoice hits the books.

If an incorrect amount is showing in the account, you'll need to apply the payment to an invoice dated before the date of the payment. Otherwise, Unapplied Cash Payment Income is correct.

Click the reply button below if you have further question with Unapplied Cash Payment. I'll get back to you.

My understanding is that the deposit will count as Unapplied *until* the date of the invoice, then it becomes applied. However, I do have examples where this is happening with payments after an invoice as well.

This makes my P/L report more income than I made, the money should be in an income account or unapplied and mine is in both. I am pretty sure we are dealing with a bug here, do you have any open bug reports regarding Unapplied income and credits on payments?

Just to be clear, I take in 1000, attach it to a invoice and Quickbooks is saying my income is 2000,  because it mistakenly believes that deposit is still unapplied. The customer's balance is 0, and all invoices are marked as paid, and I am fully reconciled, but the deposit still shows up as extra income in "Unapplied" even though it was used to credit an income account.

Was this issue ever resolved? I am having the same exact issue as clayton. By GAAP accounting principles it should be "unearned revenue" or "undesposited cash income" until the service is complete at which time it should be reported as income and be removed from the contra account. I do not want to have to change dates of deposits/invoices since this does not properly reflect when the service was complete. Please advise. 

Hi there, @deterd1805.

The issue with regards to unapplied payments that are already linked to invoices but are still showing as unapplied in the P&L report is already been closed. 

Since you're still getting the same error, it would be best to perform some basic troubleshooting steps to fix the issue. There are times that too much cache stored in a browser can cause unexpected behavior with the product. 

We can start by opening a private window and use it to access QuickBooks Online (QBO). You can press Ctrl + Shift + N for Google Chrome or Ctrl + Shift + P for Mozilla Firefox. 

Once done, open the P&L report again and check if unapplied payments are still showing. If it works, let's go back to your regular browser and clear the cache to eliminate the junk files.

If you still encounter the same issue, we can use other supported browsers for the meantime so that you can get back to work. The one you're currently using may have a temporary issue with QuickBooks.

Let me also provide you a link to check if your browser is compatible with QuickBooks: Fixit.intuit.com.

I've also added the steps on how you can customize your reports in QBO. This way, it would be easy for you to view the transactions that matter the most to your business. 

I'm always here to help if you have any other concerns or questions. Just tag my name in the comment section and I'll get back to you as soon as I can.

Customer paid an invoice in full, later realized that they did not get all of the services they paid for.   We created a credit memo after the invoice was paid, and refunded the credit memo amount.   How do I eliminate the Unapplied Cash Payment Income on my P&L which is for the amount of the credit/refund??   Thank you