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Anonymous
December 30, 2022
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Recording deposits received for future invoices to be paid (COGS)

  • December 30, 2022
  • 1 reply
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I am a home contractor. I invoice my clients for a deposit to order custom cabinets from our supplier. I deposit the money into a holding account. Then, when the cabinets come in, I receive an invoice from our supplier and I pay it from the holding account (with my client's deposit). How should I record these transaction (both the deposit received and the payment I make) in QB? The deposit recieved is not income, because I later use to pay the supplier invoice. And I don't believe the invoice I pay to the supplier is considered an expense. I think it is all COGS....I am just not sure how to record it so it balances correctly in the books. Thank you to anyone who can help.

Best answer by Rustler

COGS, when you pay taxes, is the cost of items stocked in inventory and sold. Not something you buy for a job and do not stock. You should, in the chart of accounts create a new account, type = COGS but it is titled Cost of Sales, (COS) and use that for job expenses.

 

A deposit is a company liability, you took money and the company owes the customer something in return. So in the chart of account create a new account, type is liability and title it customer deposits. Then create a service type item that links to the customer deposit account and use it on a sales receipt to record getting the deposit.

 

When you invoice for the job, as the last line select the customer deposit item set the qty to a negative one, (-1) and enter the amount of the deposit.

 

Yes the deposit is income when the invoice is prepared. On the P&L income is reduced by expenses.

1 reply

Rustler
RustlerAnswer
December 31, 2022

COGS, when you pay taxes, is the cost of items stocked in inventory and sold. Not something you buy for a job and do not stock. You should, in the chart of accounts create a new account, type = COGS but it is titled Cost of Sales, (COS) and use that for job expenses.

 

A deposit is a company liability, you took money and the company owes the customer something in return. So in the chart of account create a new account, type is liability and title it customer deposits. Then create a service type item that links to the customer deposit account and use it on a sales receipt to record getting the deposit.

 

When you invoice for the job, as the last line select the customer deposit item set the qty to a negative one, (-1) and enter the amount of the deposit.

 

Yes the deposit is income when the invoice is prepared. On the P&L income is reduced by expenses.

    A
    Anonymous
    January 1, 2023

    Thank you so much @Rustler! This is very helpful!

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