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Handling upfront deposits and retainers

An upfront deposit or retainer is a liability on your books even though you deposit the funds into your checking account. You should not record it as income when you get it.

Note: Law firms might also use trust accounts to hold client funds. The difference is that with trust accounts, you must set up a separate bank account to hold your client's funds. Be sure to always follow the rules of your state regarding the professional and ethical conduct for handling client funds. Failure to abide by those rules and practices could result in administrative, civil, or criminal sanctions.

To set up QuickBooks for upfront deposits or retainers

  1. Create a liability account for your upfront deposits or retainers.

  2. Create an upfront deposit or retainer item.

To handle an upfront deposit or retainer

  1. Record the upfront deposit or retainer as a liability.

  2. Apply the upfront deposit or retainer to an invoice.

  3. (Optional) Handle the upfront deposit or retainer for a cancelled job.

See also

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