Many business owners receive deposits from customers for services that have not yet been delivered. Some receive deposits for rentals, real estate purchases and goods valued over $2,500.00. Lawyers receive deposits from their clients that go into a trust liability bank account. Landlords receive deposits from tenants that also go into a liability account. General contractors receive retainer deposits and down payments from customers for constructions jobs in progress that go into a liability holding account as well. All of these deposits are recorded in QuickBooks Online in very specific ways. Small deposits for jobs that will be quickly completed can be recorded directly in a customer invoice, or with a sales receipt. Below are the various ways to record deposits.
Turn-On the Deposits Field for your QuickBooks Online Customer Invoices
For small jobs with little or no risk you can turn-on the built-in “Deposits” feature in QuickBooks Online by going to “Account and Settings”, “Sales” and “Sales from content”, then turning-on “Deposit”. This will add a “Deposit” field to your Invoice so that you can enter the deposit amount received and reduce the outstanding balance of the invoice. Many professional service providers take small deposits for scheduled services with established delivery dates. You can also create a progress invoice that is for a specific percentage of an estimate and receive the deposit as a payment for that percentage.
Add Product and Service Items to Customer Invoices
It is important to add the actual product or service item, or billable expenses to your customer invoices before adding any deposit amounts received. Note that a deposit itself is NOT a product or service line item and should NOT be the only item on a customer invoice. It will however record that you received income on the date of the invoice that includes a deposit amount.
Add Received Deposits to Customer Invoices
When you add the received deposit to the customer invoice it will immediately count as income for your business. You will select either the bank or undeposited funds if the payment was included with other deposits that were made that day. This process works best when you’re ready to make a customer invoice, and have already received money, the balance less the deposit will remain on the invoice as outstanding until paid.
Create Liability Account, Product and Service Item, Sales Receipt and Invoice
Most companies record deposits as an “Other Current Liability”. When you accept money from your customer as a deposit it is not yet considered income, as the money is not yours until you have earned it. If the job is cancelled or not completed for some reason, you will have to give the money back, unless you negotiated a contract for a non-refundable deposit.
Create Liability Account for Customer Deposits Received
The first step is to create a “Customer Deposits Received” account within your chart of accounts. This is setup as an “Other Current Liability”.
Create Product and Service Item for Deposit/Retainer Liability
The next step is to create a “Customer Deposit” Product and Service item, mapping the “Income account” to the “Customer Deposit Liability” account.
Create Sales Receipt Receive Customer Deposit/Retainer
Create a Sales Receipt using this “Customer Deposit” item, which will place the customer deposit into this liability account on your Balance Sheet.
Create Invoice and Subtract Received Deposit/Retainer Amount
When the time comes to progress bill or final invoice your customer you will add the same product and service item for “Customer Deposit” and subtract the dollar amount as the last line item on the invoice to show only the remaining outstanding customer invoice balance. This will move the deposit from the liability account and distribute it to income. It reverses the earlier sales receipt that placed the deposit onto your Balance Sheet.
Your Personal Guide to Seamless Accounting: Advanced QuickBooks ProAdvisor at Your Service
Hey there! I’m Gina, and I’m the proud co-founder of Lend A Hand Accounting. Why did I start this? Well, I believe that everyone should have access to affordable, efficient, and flexible accounting and bookkeeping services. It’s all about making sure these essential services fit snugly into your budget without any fuss.
We’ve ditched the traditional hourly rate system and adopted a flat fee pricing. You might be wondering, “Why does this matter?” Well, this way, you know exactly what you’re paying for upfront and there are no unexpected surprises. You get to pick and choose the accounting services you need, like a customized menu. And the best part? You’re in complete control of when you start or stop using our services. We’re essentially just a call or a text away, no need for endless phone calls or draining trips to the accountant’s office.
I’m not just any accountant though. I’m an Advanced QuickBooks Online ProAdvisor. That means I’m equipped with advanced expertise and resources to help you leverage QuickBooks Online to its full potential. My goal is to make your accounting process smooth and efficient so you can focus on what you do best – running your business.
Ready to get started? Reach out to me directly at 360-637-4799. We can even kick things off immediately if you’re ready. Simply create a free account, and I can instantly take a look at your books and let you know where you stand.
At the end of the day, we’re here to serve you. We really appreciate the trust you place in us and we’re eager to meet all of your accounting and bookkeeping needs. Looking forward to being part of your team!
Take care,
Gina
The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
