Handling Customer Deposits
Will Fleenor, CPA
K2 Enterprises
This procedure properly classifies advance customer deposits as a liability until the invoice for the goods or services has been issued. It is not necessary unless you need this classification for financial reporting purposes. If not you simply debit cash and credit accounts receivable when you receive such a deposit. When the invoice is issued the credit in accounts receivable from the deposit will be offset by the invoice amount.
Step 1: Set up an item as shown below:
Step 2: Record the receipt of the deposit as shown below:
Step 4: When the invoice for good or services is received record it as follows:
