Reimbursable expenses, unearned income? Help Please

Are you a Law Firm? If so, you are describing Advanced Costs, not income (deferred or not). And a law firm Pre-bills for Retainers. Example:

You have an Other Charge type item linked to Client Retainers Liability account. This item is listed on a Sales Receipt for the date I signed our contract and handed you the retainer that you deposit to Trust bank. Or, you Invoice my office with that item, and my payment arrives later.

Now, to match IOLTA Audit, the Trust Bank and Client Retainer Liability match balances by name.

Meanwhile, you have Service Items linked to one Other Current Asset account. The Account is named Advanced Costs. The Item(s) are whatever you want, such as Filing Fees, Expert Witness Fees, etc. This is Not the same as your own income-linked items, as Legal Fees, Mileage, etc.

You list the Service item for Filing Fees on the payment to the court on the Items tab, job track the Client here and this is Billable. You do this for the Costs you incur that are not your expense.

Then, you Invoice me, using the Add Time & Costs button. You select all of the Advanced Costs I will be repaying, plus your own Billable time (from timesheets or just manually added here).

If you intend to apply my retainer, that is done as: Issue a Trust Bank check to the firm, and on the items tab, list the Retainer prepaid item here (or make one for Retainer Requested/Received and another for Retainer Applied/Returned). Job Track that it is My amount. You can list multiple Client funds here, using this one Trust Bank check.

Now you showed that Trust Bank and Retainer Liability still match, by name. The only Trust Bank activity is in and out related to that liability.

And now you have a Check, to process as if that came in the mail or was handed to you by your Trust Department. Process each job listed on it as a separate Receive Payment. That pays the invoice.

You will need some custom reports filtered on the Retainer Liability account, and the Trust Bank, and set to total by name, to manage client balances. You also need to reconcile Trust Bank to Bank statements, but the Retainer Liability account is reconciled always using only an ending balance of 0, because the custom report set to Total by Name shows a name is at 0, and you clear only the activities for the name at 0. That's why I make two versions of the custom report; one is titled All Activity and one is titled Current Client Retainer Balances and filtered on Cleared Status = No.

If you are not a law firm and do not have a Trust Bank requirement, it is a bit different. You can put the Prepayment item on a Credit Memo to apply to the invoice, each time you Charge them. One Credit Memo can be used to list my entire prepayment, because there are two icons at the top: Apply to Invoice, and/or Issue as Refund. You can do Both, from here. You still would use custom reports total by Name, filtered on that liability account.