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  #1  
Old 01-19-2002, 07:45 PM
HBFOXJr HBFOXJr is offline
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Quick Books and deposits

I'm having a major mental problem with QB Pro 2001 and how to handle deposits/pre-payments.

They have online help but it doesn't work the way they say and I believe the info is incomplete and/or inaccurate.

3 things need to happen when we get a pre-payment for lawn care.
1. The customer needs to have a credit balance (neg bal)
2. A liability account needs to have a balance increase
3. The check needs to be deposited into my account

My head and my wife's head are both bloodied from banging them on our desks.

HELP!!!
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  #2  
Old 01-19-2002, 11:22 PM
bruces bruces is offline
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Re: Quick Books and deposits

Quote:
Originally posted by HBFOXJr
I'm having a major mental problem with QB Pro 2001 and how to handle deposits/pre-payments.

They have online help but it doesn't work the way they say and I believe the info is incomplete and/or inaccurate.

3 things need to happen when we get a pre-payment for lawn care.
1. The customer needs to have a credit balance (neg bal)
2. A liability account needs to have a balance increase
3. The check needs to be deposited into my account

My head and my wife's head are both bloodied from banging them on our desks.

HELP!!!
Harold,

The following is copied from the Quickbooks help, I don't know if this what you looked at or not, I believed I looked under prepayments.

It seems that this will accomplish everything except putting the prepayment to a liability account.

Showing the prepayment (customer deposit) as a liability is technically correct, but the fact that it shows up as a credit balance (reduction) in accounts receivable really gets you to the same place, assets are understated (receivables) and liabilities are also understated by the same amount, equity is correct.

See if this helps, if you need more info let me know and I'll try to dig it up.

The following is direct from the QB help screen.

If a customer sends you more money than he or she owes, there will be an amount left over at the Receive Payments window after you have applied the payment to invoices. QuickBooks keeps track of the credit amount so you can apply it the next time the customer owes you money.

1 Enter the payment in the Receive Payments window.

Caution: If you're recording a down payment, and you are doing more than one job for the customer, be sure to specify both the customer name and the job name in the Customer:Job field. This ensures that QuickBooks will apply the down payment to invoices for the correct job.

2 For an overpayment, apply as much of the payment as you can to outstanding invoices.
3 Note the leftover amount in the Unapplied Amount field.

If the payment is a down payment and there is no invoice yet, the entire payment amount is displayed in the Unapplied Amount field. QuickBooks holds the unapplied amount with this customer's name so that when you do have an invoice for this customer, you can apply the down payment amount.

4 (Optional) Click Print Credit Memo to give the customer a receipt for the down payment or overpayment. Do not record the credit memo.

The credit memo is for your customer only. It does not become part of your financial records in QuickBooks.

5 Save the payment.
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  #3  
Old 01-20-2002, 07:08 AM
SLSNursery SLSNursery is offline
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Try thinking of it like this

Did you create an invoice for this customer?

If No, then you can create a cash sale (under the customer menu, enter cash sales). The cash sale is the entire amount - we name an item "smithseasonal" for the full amount. Then we apply any discounts and then sales tax. The bottom line is the amount of payment, and upon completing the cash sale the check will appear as a payment (undeposited funds) in the make deposits window. There is no need to show a credit balance for the customer in my opinion, unless you are using accrual accounting. However, I further feel as though this is a completed transaction under either the cash or accrual method.

If yes, or if the payment is a deposit, create an invoice for the total amount. Then receive a payment against the invoice. If you receive the payment first (before creating an invoice), Quickbooks will show a credit balance in the customer:job list. You will need to go to the receive payments window and apply existing credits to use up the deposit. If you receive a deposit on a job, receive the payment, credit the invoice, then print a statement. This will accurately show the invoice amount, payment or deposit, and current credit or amount due. Furthermore, the payment will be in undeposited funds ready to go into a deposit.
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  #4  
Old 01-20-2002, 10:38 AM
HBFOXJr HBFOXJr is offline
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Thanks Bruce & Phil

We are on an accrual basis. QB has a method for "retainers" to allegedly do what we're talking about here. Maybe this is a 2 part operation and I'm thinking it is one.

They say to create 2 items and one new acct. The 2 items are a pre-pay "payment" item, type "banking", and a name item called "retainer", type "other charge" feeding into the new "other liablity" acct also called "retainers".

The way it is supposed to work according to "help", is you invoice the customer with the retainer item and put the amount in the rate column as a positive number. On the second line you enter the payment item as a positive amount in rate column but it automatically converts to a negative amount. This gives you a zero balance invoice.

The transaction does increase the balance of the liability account. I didn't examine the checking account but since the payment line is a bank line going to undeposited funds, something should be there.

What does not happen is showing a credit in the customer account. They're account shows a zero balance. So where or what is the transaction that should make that occur? You haave to have something there to credit their invoices with as you perform and complete services.

I don't want to pay taxes on work I haven't done or or record sales for work not done. It really distorts the earnings picture to hav ehuige sales early in the year with no expenses, then have high expenses later on with no income. I want to keep the records on an as it occurs basis.
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Old 01-20-2002, 10:43 AM
HBFOXJr HBFOXJr is offline
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Phil

"If you receive the payment first (before creating an invoice), Quickbooks will show a credit balance in the customer:job list. You will need to go to the receive payments window and apply existing credits to use up the deposit."

This looks on the right track but if I create the invoice like QB says then I'm trying to put one check in 2 different places???

I'm still very, very lost.
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Old 01-20-2002, 11:26 AM
HBFOXJr HBFOXJr is offline
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found this at the QB support site

Prepayments November 26 2001, 10:17 AM

You should never use Receive Payments until you have actually invoiced your customer. This creates a negative accounts receivable even on a cash basis Balance Sheet. You need to make a current liability type of account called Customer Deposits or Retainers. Then make an invoice item (not subject to sales tax) called CustDep and link the new liability account to it. When the customer gives you a check, make a Cash Sale and use the new invoice item to record it. This will put the amount in the liability account and make it available for you to deposit. This amount is a liability to your company until you complete the sale. When it comes time to invoice your customer, make an invoice for the total sale and on the last line of the invoice, use the CustDep item as a MINUS amount. This will move the amount out of the liability account and reduce the amount still due from the customer to zero or whatever is left still due. There is no credit memo that you have to apply. You are not taxed on the sale until you invoice the customer.

joey@casdelraybeach.com
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Old 01-20-2002, 11:52 AM
bruces bruces is offline
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Re: found this at the QB support site

Quote:
Originally posted by HBFOXJr
Prepayments November 26 2001, 10:17 AM

You should never use Receive Payments until you have actually invoiced your customer. This creates a negative accounts receivable even on a cash basis Balance Sheet.
joey@casdelraybeach.com

Harold wrote:

What does not happen is showing a credit in the customer account. They're account shows a zero balance. So where or what is the transaction that should make that occur? You haave to have something there to credit their invoices with as you perform and complete services.

I don't want to pay taxes on work I haven't done or or record sales for work not done. It really distorts the earnings picture to hav ehuige sales early in the year with no expenses, then have high expenses later on with no income. I want to keep the records on an as it occurs basis.

Harold,

If you make one step like I suggested, just receive payments from the customer and show a negative accounts receivable balance, you will not distort earnings (you are not recording income, you are just recording the receipt of the money).

If you are on the accrual basis for tax purposes, you are not increasing your taxable income by recording the receipt, you are just decreasing receivables. The only issue is that the receipt should really be a customer deposit (liablity) rather than a reduction of accounts receivable (asset). There is no effect on income. Thus, your earnings are not distorted. Once you invoice the work you can apply the credit to the invoice to clear them out.
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  #8  
Old 01-21-2002, 07:54 PM
HBFOXJr HBFOXJr is offline
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Bruce

Got it working. What we don't want to do is mess with receivables because it is not a receivable it is a liability. I have someone's money that I haven't worked for yet.

So that is why it doesn't show on the clients record or in receivables. The liability account is where the customer has parked his money so I can pay his bills when they come due. Also this method will not put sales out of wack.

Thanks
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  #9  
Old 01-21-2002, 09:02 PM
SLSNursery SLSNursery is offline
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How about this

We don't hold deposits very long for jobs, so there really isn't an accrual of funds. I.e. we don't have the same exact situation as you. For the few seasonal pre-pays, I ring them through in March or April and pay the taxes at the end of the next month. For jobs, we might get a deposit and then will almost immediately be on the job, therefore even a partial invoice would eat up the payment. There would be no hanging payments to mess up our receivables account.

I think that your situation is similar to a gift certificate application in Quickbooks. I don't have the time to check, but the setup might do what you want, and you could probably name accounts to match your customer/account names.
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