Unapplied Cash Payment Income

Thanks for taking the time to reach out to the Community for support, @john-omnifi-io. I'll outline a couple of handy details to help you fix the unapplied payment income in QuickBooks Online.

The payment date is typically earlier than the invoice date it is applied to. It'll show as "unapplied" until the invoice is recorded in the books the following week.

You'll need to apply the payment to an invoice that was due before the payment date if the account is showing the incorrect amount. Otherwise, Unapplied Cash Payment Income is correct.

Alternatively, you can record a retainer to allocate those current liabilities if you already have an invoice. You can follow the steps below on how to do so: 

1. Create a liability account by going to the Chart of Accounts from the Settings.
2. Click New, and select Other Current Liabilities for the Account Type dropdown.
3. From the Detail Type ▼ dropdown menu, Trust Accounts - Liabilities.
4. Enter a Name for the account.
5. Choose an option from the When do you want to start tracking your finances from the is account in QuickBooks? dropdown list.
6. Tick Save and Close.

Once done, you're now ready to create a retainer item. Here's how: 

1. Go to Settings ⚙, 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. Select the liability account created in Step 1 from the Income account ▼ dropdown menu, 
6. Tick Save and close.

From there, the retainer item can now be selected when creating an invoice or sales receipt for a deposit or retainer payment. You can visit this handy article for a detailed process: Record a retainer or deposit.

Also, I've got you this guide for more fixes to get around the issue you've encountered: Unapplied cash payment income on your profit and loss.

Furthermore, you can open this reference to see details on how the Sales page gives you a great at-a-glance view of the status of your sales transactions, like open and paid invoices: View sales transactions.

I'm still all ears if you need further assistance with your invoices and customer payments in QBO. I’ll be right here to answer them for you. Take care always.

@john-omnifi-io 

Are you a cash basis taxpayer?  I so, the prepayment is considered income.  If you're an accrual basis taxpayer, then it is considered a liability.  If you're on cash basis, there's nothing you need to do.  If you're on accrual basis, you can run your P&L on an accrual basis and it will move it to your balance sheet.  If you used Receive Payment, it will move the prepayment to an A/R credit.    

Hi,

I was optimistic this was going to work as it was similar to what I was trying to do.  Account for the cash receipt as a prepaid liability and then reverse that liability a few weeks later.

So per your guidance I created a liabilities account and then created a new Product or Service for "Customer retainers" and linked that product or service to that newly created liabilities account.

It then seemed like I needed to update the invoice that was paid early to show the new Product or Service "Customer retainers" which should then flow to the newly created liabilities account.

One additional complexity that exists on this issue is that this invoice has a customer discount which flows to a "Sales Discounts" account.

Now what seems to be happening is the payments are flowing to the "Sales Discount" account.

No idea how to fix the resulting QBO behavior.

Hi there, john.

I want to ensure the transactions are recorded accurately in QuickBooks Online.

Before providing any troubleshooting steps, you mentioned that you created a journal entry. Can you share more details about this? It will help us assess if this could be the cause of the issue. Also, may I know how you recorded the payment and where you see that it was added to the Sales Dsicount account? Adding additional info about this can help us provide accurate steps to fix this. A screenshot would be a great help, too.

In the meantime, I recommend checking the Account register. From there, we can review the transactions and correct the entries.

1. Go to the Gear icon and then select Chart of Accounts.
2. Locate the Sales Discount account and then click View register.
3. Review the transactions and correct the record.

Alternatively, you can also run a report to receive the payments.

Please keep us posted in this thread. I'll keep an eye on your response.