nav[aria-label="Primary Navigation"] { padding: 0; & ul { list-style: none; width: 100%; display: flex; flex-direction: row; justify-content: start; align-items: start; gap: 30px; padding: 0; & li { margin: 0; } & ul li { list-style: none; } } }

Using a separate bank account for a customer prepayment

cluksha

I have a customer who who pays me in advance to work over time. I choose to keep the money in it's own checking account separate from my normal business account and I simply transfer money when invoiced.

My trouble is how to actually invoice the customer and apply the 'credit' from that account to my business account and not mess up my AR account.

The setup it as follows:
Customer Invoices (AR)
Payments Received (Temp) (where I hold MOST payments until split into various accounts)
Rice Account (this is the separate customer bank account)
Checking (My actual Business Bank Account)

On Jan 1 she hands over $5000. I deposited into "Rice Account"
On March 10 I create an invoice for $2900

Now I wish to transfer money from the Rice account to my checking account and mark the invoice paid.

I am not sure if what I m trying to do can even be done.
When you create a payment, it only allows for a check number and a "deposit to" account. It does not allow you to take the money from one account instead of using a check number.

Any advice is greatly appreciated.

Blessings, and stay healthy this Covid-19 season.

Chris

Find more posts tagged with

Invoices

Accounts

Accepted answers

Tom Young

All entries are balanced (debits = credits) entries There are 4 transactions recorded resulting in 8 postings to different Accounts.

As you can see, the Deferred Revenue liability Account becomes the "bank account" into which you make "deposits" as the invoices are "paid."

All comments

Tom Young

It's not clear what accounting entry you make when you actually receive the cash.

I know nothing about the "Business" product and exactly how it works, but the accounting itself is easy enough:

1st entry: To record advance payments of cash from client

Debit (increase) Rice Checking Account $5,000
Credit (increase) Deferred Revenue Account $5,000 (this would be a liability Account)

2nd entry: To record billing for work performed

Debit (increase) Accounts Receivable Account $1,250
Credit (increase) Business Revenue Category $1,250

3rd entry: To record "payment" of outstanding invoice

Debit (decrease) Deferred Revenue Account $1,250
Credit (decrease) Accounts Receivable Account $1,250

4th entry: To transfer cash from Rice checking account to business checking

Debit (increase) Checking Account $1,250
Credit (decrease) Rice Checking Account $1,250

cluksha

Thank you Tom. I am digging into this but am not sure about what you wrote.

As labelled there are four entries. Are those actually only four entries with two options or are they actually eight entries?

Thanks,
Chris

Tom Young

All entries are balanced (debits = credits) entries There are 4 transactions recorded resulting in 8 postings to different Accounts.

As you can see, the Deferred Revenue liability Account becomes the "bank account" into which you make "deposits" as the invoices are "paid."

cluksha

Thank you Tom!

RandyP

If you haven't figured out a solution, here is my suggestion for when you receive payment for work not yet performed or for services not yet rendered.

Deposit the money into your business account.
Go to the "Business" tab then click "Business Actions > Invoices and estimates > Issue a credit..."
In the pop-up window, select the invoice account, and click "OK".
Select the client's name.
For the Item, select "credit".
For the Category, select "Biz Sales."
Enter a description if you want.
For Quantity, enter "1"
For the amount, enter the amount of the deposit.

That's it. As the work is completed, go into your invoice account and you will see the "CRED" invoice for that client. As you add and charge items to that credit, the amount will be reduced accordingly.

Hope this helps, however late it might be.

Randy

Tom Young

@RandyP

I don't have the Business product so I can't duplicate what you've posted here, but it seems to me that the credit issued to the customer is affecting the Category "Biz Sales", reducing revenue, and that's not what you want to do. In other words you've made an entry that has affected your year to date revenue figure, and you know that's not correct.

What you need to do is have the cash received not affect the revenue dollars until you actually earn the money. You do that by offsetting the deposit to a liability Account as a form of deferred revenue. Then, as you perform your services and earn the revenue you reduce that liability Account until it zeros out.

Like I said, I may be wrong here because I can't duplicate the entry you've proposed in Quicken.