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jeffmjohnson330
May 11, 2024
Question

Send an invoice with no accounting entry

  • May 11, 2024
  • 1 reply
  • 0 views

I use accrual accounting and I send out invoices for work I have not yet performed. It is essentially just a request for them to prepay for their services. When I create an invoice, Quickbooks automatically puts the amount into accounts receivable and unearned revenue. It shouldn't be in accounts receivable since the work has not been performed and it shouldn't be in unearned revenue since no transaction has taken place. How do I make it so no accounting entry takes place until I receive the prepayment (and it goes into unearned revenue at that time) or I perform the work (and it goes into accounts receivable)? As of right now it makes it so I can't tell what truly is part of accounts receivable (where I have performed work but haven't been paid) and what is just a prepayment request.

1 reply

M
MirriamM
May 11, 2024

Hello there, Jeff. I can assist you in recording your transactions and help you ensure that no accounting entry takes place until you receive the prepayment or perform the work.

 

To do this, you can create an estimate instead of an invoice. Once you receive the prepayment, you can record it as a retainer or deposit, which is treated as a liability. Although your business is holding the money from a deposit or retainer, it doesn't belong to you until it's used to pay for service. Once you invoice the customer and receive payment against it, you can turn that liability into income.

 

Here's what you'll need to do:

 

Step 1. Create a liability account.

Step 2. Create a retainer item.

Step 3. Create a trust liability bank account (Not always needed).

Step 4. Create Sales receipt or Invoice for deposits or retainers.

Step 5. Turn retainers into credits on invoices.

Step 6. Transfer funds from your trust liability account to your operating account.

 

For the step-by-step process on each step, feel free to read this article: Record a retainer or deposit.

 

Most importantly, I suggest seeking help from your accountant. They may provide another way of recording advance payments from your clients in QuickBooks.

 

Moreover, you can run and customize reports in QuickBooks Online to focus on the details that matter the most to you, especially your sales and purchase transactions.

 

If you need further assistance or have other concerns besides payments, feel free to add them to your reply below, Jeff. I'm always here to help.

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