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How to Record Customer Down Payments and Retainers

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Customer’s partial payments of any kind – down payments/deposits or retainers are money you receive upfront before you actually sell your products or services.   In other words, you have not earned the money yet or you still owe the money to your customer.
For example, many lawyers require retainers to perform their job, or you sell hot products that require down payments to order it to manufacturer, or you simply require deposit to from your customers.

How do we handle this type of transactions in QuickBooks?  
1.    First, you need to create Customer Down Payments/Retainers account in your chart of accounts with Other Current Liability type.
2.    Second, create Down Payments/Retainers item in your Item List as Other Charge or Service item type.  Attach the Other Liability account created in Step 1 to this item.  Make sure the Tax Code field is for non-taxable item.

 

QB Handling Customer Down Payments and Retainers 1

 

Once you have both the Customer Down Payment account and item, the following is how to record your customer down payment:
1.    From the Main Menu > Customers > Enter Sales Receipts to open Enter Sales Receipts window:

 

QB Handling Customer Down Payments and Retainers 2

 

2.    Fill in the Customer:Job, Date, Deposit to, & other fields as you enter Sales Receipt or Invoice except for the Item column where you need to enter the Customer Down payment item you just created above.

3.    Enter the Amount of down payment or retainer.
4.    Click Save & Close.  This will increase both your bank account and other liability account.


To apply the down payment amount to invoice, just apply the Customer Down Payment item as a negative amount:

 

QB Handling Customer Down Payments and Retainers 3

 

As you can see in the invoice, the Customer Down Payment item reduce the total amount due from customer without affecting the sales tax as it should be.

 

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