Summary of How to handle deposits in regards to invoicing?
- 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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How to handle deposits in regards to invoicing?
Hi! I just started as a bookkeeper for an HVAC company that recently opened up, so their processes are not perfect yet. Right now, if it’s a big job that the customer sends a 50% deposit on, they create an invoice that notates the deposit but doesn’t go to the customer. Then when updates are made, job is finished etc., they finalize the invoice & send it to the customer.
The problem is, when those updates are made, their production system updates the invoice date to the current day. So they’ll send me a report for March sales with an invoice for $30k on it, unbeknownst to me that’s just a deposit. Then for example they’ll send me April sales to book, and it has that same invoice# but now it’s $60k. So I have to adjust March sales because AFAIK that $30k should’ve never been there in the first place.
Sounds pretty screwed up because it is. There is 0 intent to double book or cook the books in any way, they are just a little lost and quite frankly so am I. They also got me doing bookkeeping in Excel so it’s all pretty manual.
How should they handle their invoicing to avoid this?