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TK3
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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. 

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Best answer 10-15-2018

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Established Community Backer ***

@ 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


3 Comments
Highlighted
Established Community Backer ***

@ 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


Not applicable

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.

Established Community Backer ***

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

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