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RonDecantWinery
Level 2

Pre-Paid Memberships & Benefits Accounting

We are currently starting a winery with a Founders Wine Club.  The club members will join by paying $1,000 club membership.  This will entitle them to one free bottle of wine 5 times per year for the next 3 years.  How do we account for the prepayment ?  How do we account for the free bottles to preserve the matching of revenue and cost?

6 Comments 6
lynda
Community Champion

Pre-Paid Memberships & Benefits Accounting

For this type of transaction, I would use a group item or a bundled item (QBO term) and divide out the item by line.  The customer will only see the subscripton, but you will show it as income (for the current year) and prepaid income for the subsequent years.  Then at the 1 yr. anniversary of the year they purchased, move the 1/3 income from prepaid to income and then again one year later to show the final year’s earned income. It would look like this on your screen:

 

Winery Subscription 

 Income acct:    $333.33

Prepaid income $666.67

 

Then the journal entry would look like this:

 

Debit prepaid income:   $333.33

Credit Income acct:  $333.33

 

Same for going into year 3 but the amt. would be $333.34, $333.34

 

That will clear out the entire prepaid account for that customer.

 

 

EmilyCowan
Level 7

Pre-Paid Memberships & Benefits Accounting

Hey @RonDecantWinery - welcome to QB Community and congratulations on your new venture! I hope you found @lynda's response helpful - she really knows her stuff :smileyhappy:

 

One of our senior community members is in the wine business. @WineGuy, wanna say hello?


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RonDecantWinery
Level 2

Pre-Paid Memberships & Benefits Accounting

Lynda - thank you for taking the time to respond to my query.  your response is very helpful and gives me a better understanding of how to record this type of transaction.

lynda
Community Champion

Pre-Paid Memberships & Benefits Accounting

Your welcome.  It is a tricky transaction for sure.  :)

Krustytheclown
Level 1

Pre-Paid Memberships & Benefits Accounting

Great question.

When I started my consulting business, this was definitely an issue. I kind of have the same issue right now as well but it's more related to how to invoice a client. With so many options like Paypal, QuickBooks, Invoice Simple etc can get kind of annoying. I'm always open to trying and learning about payment services to increase productivity. We are also looking for a quality scheduling software at an enterprise level so feel free to share.

steve33
Level 1

Pre-Paid Memberships & Benefits Accounting

I used to use the likes of quickbooks and invoicesimple. Now I found an app called bookipi invoice generator

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