Advanced deposits are money a customer has given to the business in advance for a service that has yet to be billed, completed or services rendered. This is a liability to the company and act as a promise from the company to the customer to perform the services the deposit is made on.
This article details the steps in correctly setting up advanced deposits from customers as a current liability in QuickBooks to ensure accurate bookkeeping.
Very Important: Do NOT make credit memos for advanced deposits.
Step 1: Set up an Other Current Liability Account.
Step 2: Set up the In and Out item for Advanced Deposit.
Step 3: Record the Deposit.
Note: It is important to utilize the Enter Sales Receipt function when dealing with advanced deposits.
Step 4: Create the Invoice and apply the deposit.