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RPP2021
June 12, 2021
Question

Creating Invoices Correctly to Record Collecting a Deposit

  • June 12, 2021
  • 1 reply
  • 0 views

Hello, 

My company collects a 30% deposit upfront for services at the start of the engagement and the remaining balance plus HST/GST is collected when the service has been completed. 

 

I'm running into a recording issue on my invoices. For example, I provide an estimate in November, 2020 to a client for $2000 plus tax. In November, 2020 they provide me the 30% deposit of $600 and we begin working together. I convert the estimate into an invoice and record the $600 payment going into my Operating Bank Account (deposited via Email Money Transfer). 

 

The services will be completed in 2021 and that's when the full $2000 + HST should be considered as sales and GST/HST collected (for the year the income is earned).

 

However, because I created the invoice in November, 2020 and reflected the $600 deposit, the full $2000 is being recorded under my Sales for 2020 on the trial balance report. I also have a portion of the $600 deposit being recognized under my GST/HST reporting. 

 

Could anyone please tell me how I can record the deposit collection transactions so it won't reflect as income collected until 2021 when the work is completed? Keeping in mind that I still need to reconcile the bank account for the transaction coming in.

 

Thanks in advance! 

1 reply

carolineambrozio
carolineambrozio
June 13, 2021

Hi RPP2021,

 

I'd be happy to point you in the right direction.


There is more than one step to record this transaction, such as recording an unearned Revenue account. For this reason, it's best to reach out to your accountant to make sure all the appropriate accounts are adjusted as they are trained on how to do this. If you don't have an accountant no need to worry, we can help. You can go to My Accountant>Find a pro to help to find an accountant in your area.

If you have any questions please feel free to reach out and let us know. We'd be happy to help.

R
RPP2021Author
June 13, 2021

Hi Caroline, 

 

Thanks for your reply. My accountant is aware of my situation but wasn't sure how to display that in the QuickBooks Online software. 

 

Could you please provide me a break down of the steps to record the deposits being received in one year but then recognized as sales/revenue in the next year? Are there any links in the QuickBooks forums I could visit to review these steps?

 

I called QuickBooks phone support but the agent I spoke with couldn't solve the issue.

 

Thanks!

L
LauraAB
June 14, 2021

Hi again RPP2021,

 

It's great to hear that you're already working with an accountant. I can appreciate not being sure of the proper steps to take in this situation and I want to make sure both you and your accountant have the information you need for moving forward with recording these kinds of transactions in your books.

 

As a member of the technical support team, I can't advise you on the best steps to take to record the transaction you're looking for. As Caroline mentioned, that falls into accounting territory, and since I don't have the training for that area, I leave it to the pros. What I will do is highlight a few of the different ways to record deposits in QuickBooks Online.

 

There are a few ways you can record deposits against invoices in the program. The first way is to turn on and use the built-in deposit feature so that the amount deposited is accounted for right away while the balance of the invoice is left open. Here's how you can turn on that feature.

  1. Go to the Gear icon.
  2. Choose Account and settings.
  3. Select Sales.
  4. Click the Sales form content section.
  5. Toggle the option for Deposit.
  6. Click Save.

Now when you go back to your invoice transactions, you'll see the deposit field in the subtotal, where you can enter the amount of the deposit as needed.

 

Another way to handle deposits is to use the steps outlined in the following article: Record a retainer or deposit. This method offers a bit more of an in-depth, although manual process of how you can go about it. This may be useful for your accountant.

 

As for your reporting, one thing to consider is if you're running the report in cash or accrual. If it's in accrual, it's going to show the amounts from invoices as well, even though those funds haven't actually been collected. For your purposes, running a report in cash may give you the more accurate outlook on your numbers that you're seeing. Here's an article about cash and accrual accounting: Choose between cash and accrual accounting methods in reports

 

As a note for your accountant, if they haven't already, they're welcome to sign up for a QuickBooks Online Accountant account. This kind of account gives them the tools they need and the opportunity to connect with you via the My Accountant tab to work with you directly in your books. They also have access to in-product training and certification to help them learn the ropes of using QuickBooks in an accounting capacity.

 

I hope that this information has helped you both. You may still receive responses from others in community who may be able to offer more accounting-based guidance on this, but this should get you started.

 

Take care and have a great week!

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