| Depending on the type of business your company engages in, you might receive advances, deposits, or retainers from your customers or clients. Although this money has been paid to you, it is for future services and has not yet been earned. Therefore, instead of recording the money as income, the payments you receive should be recorded as liabilities. After you perform the services and earn the money, you transfer the liability to an income account. - Select Make General Journal Entries from the Company menu.
- Verify that the correct date appears.
- Enter the liability account where you record your deposits.
- Enter the amount you are ready to transfer to income. This entry should be a debit.
- Enter an optional memo.
- Enter the customer or client who made the deposit.
- Enter the income account where you record the money you earned for this job.
- Enter the amount of the deposit or retainer in the credit column.
Did You Know? You can refer to customers and jobs in journal entries without having the amount flow through to a customer invoice. The only time a journal entry amount flows through to a customer invoice is if the entry is made to an expense account. Customer and job references on nonexpense account lines are information-only entries. |
- Save the entry.
See Also See "Receiving Advances, Retainers, and Down Payments" on page 129 for information on the proper method for recording the receipt of a deposit or retainer. |
Did You Know? You can record down payments on customer invoices. An alternative to recording down payments with journal entries that go straight to the liability account is to set up down payments as an Other Charge item, with the related account being a liability account. You can record down payments on an invoice form, using the Other Charge item on the invoice. Because the Other Charge item is not related to an income account, your income records are not affected, but by recording the down payment as an Other Charge item you can spot the amount on a Sales by Item report. |
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