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Invoice deposit for Technical Support

do you receive down payments as prepayments  for the items that you give to your customer   QuickBooks Online has two different ways to record  upfront payments so even if you're getting job   deposits for future services or getting paid in  advance for items I'm going to show you both ways   to record them in QuickBooks [Music] Online  [Music] QuickBooks Online has a special job   deposit feature that could show up at the bottom  of an invoice if you activate it from the account   settings window but that's not really the best way  to record upfront payments all the time sometimes   down payments or Advanced payments are best  recorded under the traditional method and I'm   going to show you both of them them right here  right now so when making your choice between the   traditional method and using the QuickBooks Online  deposit feature please consider the following your   teacher recommends the traditional method that's  because it can be used with any accounting system   even QuickBooks desktop it keeps more accurate  and detailed records and keeps your QuickBooks   customer records updated correctly which is really  the most important thing on a day-to-day basis   and it has more information on the customer  reports so you really see what's going on now   regarding the online invoice deposit feature it's  simply more convenient it uses the feature that's   automatically included with QuickBooks online and  I promise I will demonstrate that feature after I   demonstrate the original method when you use the  traditional method the service is owed to the   client in the future for The Upfront payment that  means that the moment you get the money you need   to record a negative number in the customer's  balance and in the customer's records now   physically you record the traditional method by  using the receive payments window the way you did   with all previous payment pents that you recorded  from clients in Prior videos for prior invoices   and if you need to give them some kind of deposit  receipt as proof of The Upfront payment you can   just use some template that you have already in  Microsoft Word or excel fill in the details of   the sale and print it out so what happens in the  accounts when the customers pay in advance if we   get money from a customer the bank balance goes  up up the customer's balance goes down and you   could temporarily have a negative balance in the  customer's account until the job is done and the   payment stays in the customer records as what we  call an unapplied credit and you saw an example of   that in earlier videos now let's do an example  using the oldfashioned method so let's imagine   on March 24th Allan paid us $700 in advance for  a future service and this payment is completely   unrelated to any previous open invoice we will  record this in the receive payments window and   we will record it directly deposited into the bank  account we will not apply this payment to any open   invoice and and that's why it will generate  a credit memo from the top left we click new   receive payment and we make sure that the date  is March 23rd in our little story a March 24th actually and the customer is Allan now  look what happens when we choose Allen   we get his open invoices now the payment  method was cash and it goes directly into   the bank and the amount we received was 700 now  notice QuickBooks assumes we are applying it to   an invoice but we are not not yet because we  specifically stated that the existing invoices   have nothing nothing to do with this down  payment for a future job so you must click   to remove the check mark and when you're  ready to save the window you should have   money in the received field but none of  the invoices selected save and close and   it says we'll save this payment as a credit  since you did not select an invoice save as credit and we can check this on the open invoice  report reports custom open invoice and here's   the section of Allen and you can see here's the  payment and you can see the reason it's on top is   the teacher forgot to put the right year so let's  just Rectify that now and then the uh open invoice   report up save as credit the open invoice report  will show it properly in date order so if you   didn't make the mistake yours would be the last  transaction listed and here it is and again it's   only on the open invoice report because it has  not yet been applied to an invoice so now let's   imagine it's March 25th and we actually did the  15 editing hours for Allen that we received the   700 $ for now we'd like to apply that $700 payment  to the invoice that we're about to make but first   we have to make the invoice from the top left  we click new invoice the date is March 25th of 2025 the customer is Allan and we have  to make sure that we choose editing 15 now click save and uh excuse me click save and close and when we go back to the open invoice  report you can see that the new invoice dated   March 25th is right here for $2,100 and we  still have the $700 payment that we need to   apply so now the open invoice report shows both  because you have not yet applied the payment to   the invoice from the top left we click new  and go down and click receive payment now   we choose Alan Arby and of course we keep the  same dat date and notice what QuickBooks Online   did it assumed that the credit that was  available should be applied to the oldest   but we have to correct this we have to  uncheck the wrong one and then recheck   the correct one it's not that easy because if  you click the box it assumes you're using the   entire amount you have to overtype with just  the amount you're applying to that invoice so you have to also be careful about what  QuickBooks Online put up here you have to   type zero yourself when you make a0 payment so  when you finish before you save this window the   amount received has to be zero and the amount  of the invoice and credit or payment has to be   the full amount that you're applying 2700 here  and most importantly before you save the window   double check and make sure the amount received in  the amount received field shows zero remember you   did not receive money you're only applying  the previous payment to the current invoice   two 700s here and zero here and click save and  close and when we come back to the open invoice   report you can see the payment is gone and the  invoice we just created has been decreased to   $1,400 and by the way if you want to have the  same numbers in your QuickBooks online account   that I'm showing here in the video so that you  can follow stepbystep and match numbers you can   look below this video in the description field  below the table of contents and you'll get the   link link to the full accounts receivable course  that video will show you how you can set up from   zero follow step by step and match numbers so  that you can learn the entire series all the   way up to this video now the QuickBooks online  job deposit feature is more convenient to use   than the other method it even gives an invoice as  a proof of payment receipt for The Upfront down   payment however it makes your records a little bit  less accurate between the moment you got paid and   the moment you deliver the service sometimes when  customers pay in advance they want both a receipt   for the deposit they just gave and an invoice  for the entire balance of the job right at the   start of the job QuickBooks Online provides the  QuickBooks deposit feature so they can satisfy   this condition and when we use the deposit feature  in QuickBooks Online it must first be activated in   the company settings window you see we click  the Cog wheel and we click company settings   but remember if you're using the plus version of  QuickBooks Online it's called account settings but   it's in the same place and it does the same thing  once you open the settings window this option is   in the sales category and all you have to do is  click to activate by clicking the word on right   next to the word deposit and once you do that  it means the next time that you open an invoice   there will be an additional box at the bottom  right of the screen just for you to put in the   amount of advaned payment or job deposit that the  customer gave in order to reduce the invoice right   at that moment so let's go ahead and activate it  now together now before we activate it let's take   a look at an invoice to make sure that it does  not yet have the job deposit box if we click new   invoice and we go to the bottom right you can see  that this is the original box for sales tax that   you can learn about in a different course from  this one so let's activate the feature in either   the account settings or company settings window  we can reopen the settings window by clicking the   Cog wheel in the top right going over to where it  says either company settings or account settings   and opening up the settings window now once  you're in the settings window click the sales   category and you can clearly see this section  for sales form content clicking once anywhere   in the section allows you to edit the options and  this is the one that we want so on the same row as   deposit click to make the option green to indicate  that it's active now click save in the section and   don't forget to click done at the bottom of the  window see right here done now that you click save   and click done you can click new invoice and when  you look at the bottom of the invoice you can see   QuickBooks Online has added the deposit feature  with a little box for you to put in the customer's   payment so what exactly are the steps for using  this job deposit feature in QuickBooks Online   well you have to create the invoice for the whole  entire entire job on the day that you receive the   deposit or down payment you record the amount  received in the field for deposit that's what   it's for QuickBooks Online will deduct the amount  of the deposit field from the total and you can   give the client the invoice as proof of payment  for the deposit it will show the decrease for   the deposit and the remaining balance now they  already have the full invoice as a request for   payment when the job is done so that's another  added convenience so clearly you're going to put   the money amount that the customer paid you right  there in the bottom right because that's what it's   created for and it's specifically intended to  receive Advanced payments for the invoice that   you're making but but when you think of what  this method actually records when you save the   invoice you'll see that there's a little bit of  a contradiction think about what the job deposit   box does you see job deposits are supposed to be  in advance payments before the job starts however   when you record an invoice QuickBooks Online will  record the entire job's income as already earned   so that's a bit of a contradiction you got paid  before the job started but you recorded all the   income as earned how could both be true I got  a payment before the job started and I recorded   the advance payment and now it indicates that I  already earned all the income why do we do that   we do that because this idea comes from how  bookkeeping was done in the days before the   computer in the days before the computer some  company's clients needed a receipt for the   advanced deposit for the job and companies wanted  to give a document explaining and requesting the   remaining amount unpaid so that it's clear  to the client what they're going to have to   pay when the job is done so what happened was the  invoice became both it became the formal request   for payment and became a receipt that proves  that the customer paid some money in advance   so we can record them together at the same time in  QuickBooks online because some clients expect them   to be recorded together and received together so  what happens when we record an invoice an action   use the deposit feature well when you record an  invoice the income increases by the entire amount   of the invoice the invoice amount comes from  the total of the items and the items go into the   income accounts so the income will increase for  the total amount and QuickBooks Online will assume   all of that income is earned what else will happen  when we record an invoice and use the job deposit   feature well we just got cash from the customer so  obviously cash in bank or either undeposited funds   will increase by the amount received so if you  take the income earned and you deduct the amount   received the difference is what's still owed so  the difference will increase accounts receivable   for the amount of the invoice that's unpaid and  these are how the numbers will change so let's   imagine on March 26th candy gave us $900 as a  partial down payment for 15 Video hours to be   done in a future date so here's a situation where  we're using the job deposit feature and now let's   crunch the numbers I happen to know that 50 Video  hours would be $4,500 in video income and that   would be the full amount of the invoice now we  received $900 cash as the inadvance job deposit   down payment therefore $3,600 is still owed as  the balance of the invoice and these will be the   three numbers that change the chart of accounts  and the trial Bank balance so what will happen   in this particular case when we record this  invoice with the job deposit feature while the   income earned will increase by the full amount  4,500 the cash in bank will go up by the amount   we physically received and the difference which  Still Remains owed on the invoice will increase by $3,600 so what will be the result in the trial  balance when we record this invoice well we   just earned $4,500 more in video income so for  the total balance of the invoice video income   will increase to 51,6 and we just physically  deposited $900 more into the bank account so   cash in Bank increases by 900 and becomes 29,8  890 and the difference of 3,600 is still owed on   the invoice so accounts receivable increases  by that amount and becomes 25,500 let's take   a look at how to record it from the top left  we click new invoice the date is March 26th of 2025 the customer is candy the  product or service is video wedding 15 so far everything is the same but if  we scroll all the way down and there it   is the field for job deposit we can  click in the deposit box and we can   type in the amount that candy  physically gave us today March 26 notice when we push tab QuickBooks Online knows  that there is still $3,600 remaining owed for this   invoice and then we click save and close we can  open the trial balance and see the results are   exactly as what we expected cash in bank went  up to 29,8 190 accounts receivable went up to   to 25,500 and video income increased to 51,6 now  the open invoice report should still show the net   amount of the open invoice which is the total  of the invoice minus the deposit the customer   gave we know that amount is 3,600 so we will go  to the reports menu and go down to open invoice   scroll out a little for the audience and when we  go down to Candy here we can see that the invoice   we just created has a remaining balance of $33,600  so in continuing with this example let's imagine   that it is now March 28th and we finished the 15  hours of video video that was invoiced with the   $900 deposit that we received what exactly do  we do when the job is finished and we're using   this method the answer is you do nothing there's  absolutely nothing else to do that's because the   income from the job has already been recorded  and it was recorded the minute we made the   full invoice you might want to reprint and resend  the invoice because you might want to remind the   client that the job is done and it's time to pay  but there's no additional entry to record because   everything has already been recorded now remember  there is no method of recording Advanced payments   prepayments job deposits or down payments that  does not require an accountant level adjustment   between the moment you got paid and the moment you  performed the service but you will only need this   adjustment if you prepare formal audited financial  statements between the moment you got the money   and the moment you did the job that's very rare  and even if it happens if you're going to prepare   audited financial statements you're going to need  a CPA anyway so take the recommendation of the   certified professional of exactly how to record  The Adjustment but just to be completely thorough   for the students who are so curious about how to  record the adjustment in either method I'm going   to give you a quick summary of each as the close  to this video so to be absolutely clear we're only   talking about the time period between the moment  we receive the advanced payment and the moment the   final service is given you only have to make an  adjustment if you are required to report formal   audited financial statements between those  dates you see between those dates accounts   receivable could be misleading if you simply  took the balances of your customers and put them   together as accounts receivable on your balance  sheet that balance should should not include any   customer's negative balance because it throws  off the amount that a person who's looking at   the financial statements will understand as how  much is owed in total from all clients together   that negative amount should instead be unearned  income that's the right way to classify it when   presenting financial statements under generally  accepted accounting principles so what's the   deal well the amount that is unearned between the  moment that you make the financial statements and   the moment that you give the service should not  be represented as a negative number in accounts   receivable instead it should be unearned so what  do you do well you have to remove the negative   number from accounts receivable by increasing it  by the negative amount and then then you have to   increase unearned income by just the amount that  was not yet earned between the moment you make the   financial statements and the moment you finish  giving the service now these adjustments are   all done as journal entries and I promise we will  learn about journal entries in the future however   it's very simple to record a journal entry even if  you never studied accounting you should know that   this is what the journal entry would look like you  would make a debit to account receivable and the   specific customer's balance for the amount that  is unearned for the amount of service that you did   not yet perform between the financial statement  date and the date that you finally finished giving   the service that will increase accounts receivable  so it is not misleading and then you would have to   make a credit to unearned income because crediting  unearned income increases it by the amount that   is not yet earned at the moment that you make  the financial statements now if you're using   the job deposit feature your accounts receivable  would also be misleading at the moment you make   formal financial statements if you do not make  an adjustment that's because the invoice that   you recorded when when you made the deposit is not  yet owed to you from the client because the job is   not finished at the moment you're reporting your  statements income would be overstated because it's   not yet earned so if this is the crucial moment  we're talking about the amount that was not yet   earned between the moment you make the statement  and the moment you give the service so not only   is the income not earned but the money is not yet  owed to you at that moment so you have to fix both   of those things so what do you do well you have to  decrease income by the amount that's unearned and   decrease accounts receivable by the amount that  they do not yet owe you which is the same amount   the amount that is unearned and of course your  accountant will make a journal entry to do this   what would the journal entry be well you would  have to decrease your income account by making   a debit because the income that's reported is a  little overstated because you have not yet earned   the full amount at the moment you're reporting  your financial statements and you would have to   decrease accounts receivable and the specific  customers's balance by the amount that they do   not yet owe you because it is not yet earned  and again even if you don't know how to make   journal entries just follow this template if you  need to adjust for yourself you will not need to   adjust for yourself because if you're making for  formal financial statements you're going to be   working with a CPA that will know how to make  this adjustment thank you so much for watching   this video all the way till the end I'm here in  the comment section if you have any questions just   ask and I hope you will click like And subscribe  to help support the free channel for everyone