How to correctly set up advanced deposits from customers and gift cards as a current liability within QuickBooks, enhancing accurate bookkeeping.
Detailed instructions.
Advanced deposits are money a customer has given to the business in advance for a service that has yet to be billed, completed or services rendered.
The money is a liability to the company and act as a promise from the company to the customer to perform the services the deposit is made on.
VERY IMPORTANT: *Please do not make credit memos for advanced deposits. To correctly set up an advanced deposit environment in QuickBooks please follow these steps:
Step 1: Set up an Other Current Liability Account
1. From the List menu, select Chart of Accounts.
2. Click the Account button and select New.
3. Select Other Account Types at the bottom, click on the drop down and select Other Current Liability.
4. Click Continue.
5. In the Account Name enter a name for the account. (Example Advanced Deposits or Gift Certificates.)
6. Click Save & Close.
Step 2: Set up the in and out items for Advanced Deposit/Gift Certificate
1. From the List menu, select Item list.
2. Click the Item button and select New.
3. In the Type field drop down select Other Charge.
4. Enter a name for the item. (Example Advanced Deposit in or Gift Certificate Purchase.)
5. In the Account field, click on the drop down and select the Other Current Liability Account setup in Step 1.
6. Click Next.
Step 3: Setup a Discount Item (Advanced Deposit Out/Gift Certificate Redeem)
1. From the List menu, select Item list.
2. Click the Item button and select New.
3. In the Type field drop down select Discount.
4. Enter a name for the item. (Example Advanced Deposit Out or Gift Certificate Redeem.)
5. In the Account field, click on the drop down and select the Other Current Liability Account setup in Step 1.
6. Click Next.
7. Click OK.
Step 3: Record the Deposit
1. From the Customers menu, select Enter Sales Receipts.
2. In the Customer: Job field, click on the drop down and select the Customer name.
3. In the Item field of the Sales Receipt, select Advance Deposit In or Gift Certificate Purchase.
4. Enter an amount in the Rate column.
5. Click Save & Close.
Note: It is important to utilize the Enter Sales Receipt function when dealing with advanced deposits and gift certificate purchases.
Step 4: Create the Invoice and apply the deposit.
1. From the Customers menu, select Create Invoice.
2. In the Customer: Job field, click on the drop down and select the Customer:Job.
3. In the Item field on the Invoice, click on the drop down and select an item to invoice the Customer:Job.
4. In the next line on the Invoice, click on the drop down and select the item setup in Step 3.
5. Enter an amount in the Rate column as a negative.
6. Click Save & Close.
Once the actual sales occurs and you want to apply the prepayment, do the invoice (or sales receipt) like normal for the full charges, then add the prepayment item for a negative amount to be applied and the amount owed on the invoice will be correct.
If this solution does not resolve the issue, you can read discussions and post messages and questions relating to your issue on the Intuit QuickBooks Community site. You can also review other available QuickBooks support options for additional guidance.
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