Summary of NetSuite Applications Suite
- What type of account is customer deposits?
- What are the 4 types of deposit accounts?
- What is a consumer deposit account?
- What is a client deposit account?
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AI Overview
AI Overview
Customer deposits are treated as a current liability on the balance sheet because they represent payments received for goods or services not yet delivered
. Record the receipt by debiting Cash (Asset) and crediting a Customer Deposits account (Liability). When the service is provided, debit Customer Deposits and credit Revenue.
Accounting Steps for Customer Deposits
Receipt: When receiving money, debit the bank account (Asset) and credit a liability account (e.g., Customer Deposits or Unearned Revenue).
Recognition: Once the goods or services are delivered, reverse the liability by debiting the Customer Deposits account and crediting the Sales Revenue account.
Refunds: If the deposit must be returned, debit the Customer Deposits liability account and credit the Cash account.
Key Considerations
Classification: It is a current liability because it is generally settled within 12 months or less.
Purpose: It acts as a safety measure, as the company does not technically own the money until the service is rendered.
Tracking: It is essential to track these deposits by customer to maintain accurate, detailed records, often managed through QuickBooks.
Non-refundable vs. Refundable: In accrual accounting, even non-refundable deposits are generally treated as a liability until the service is performed.
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Customer Deposits
When a customer makes an advance payment for an order or project, you can record the funds received as a customer deposit. These payments go into your general ledger as a liability until you deliver the goods or services, and they don’t affect the customer’s accounts receivable balance.
When the order is filled, the deposit is applied against the invoice and the liability is canceled out.
To record customer deposits and apply them to invoices, you must use the Accounts Receivable (A/R) feature. To enable A/R, go to Setup > Company > Enable Features (Administrator), and click the Accounting subtab. Check the A/R box and click Save.
With the A/R feature enabled, the Customer Deposit general ledger account is generated along with the first Customer Deposit record. Even if you do not have a permission to create accounts, you will still be listed in the system notes as the Customer Deposit account creator. The Customer Deposit account tracks each deposit as an Other Current Liability.
Record prepayments from customers by going to Customers > Accounts Receivable > Record Customer Deposits. Then, you can track funds the customer has paid until the goods or services are delivered. For more information, see Recording a Customer Deposit.
You can view a customer record and click the Financial subtab to see if the customer has any unapplied deposits recorded. The Customer Deposit Balance field displays the total amount of unapplied deposits for the customer.
When you have entered a customer deposit, you can generate a payment receipt for the customer. For more information, see Payment Receipts.
You can apply a deposit against an invoice in one of the following ways:
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Go to Customers > Accounts Receivable > Accept Customer Payments > Deposits > Deposits.
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View a customer deposit record and click the Apply button.
NetSuite tracks the date when each deposit is applied to a customer invoice. For more information, see Applying a Customer Deposit. If you use the Consolidated Payments feature, any deposits made by a customer or its subcustomers can be applied to any of the open invoices in the customer hierarchy. For more information, see Consolidated Payments.
If needed, you can refund a customer deposit using the customer refund form. For more information, see Issue Refunds for Customer Deposits.