The simplest way is to enter the payment in the Customer menu under "Receive Payments". If there are invoices already entered for this customer and you do not want to apply this prepayment to those invoices, just un-check the invoice that Quickbooks auto-applied the payment to.
After you uncheck this option the Overpayment note at the bottom of the screen will disappear. Click Save & Close and an option box will pop up on the screen. Since this is a prepayment will want to the select OK which will save the payment to the Customers account as an un-applied payment.
Entering the pre-payment using this method will have the effect of reducing the accounts receivable balance in the Assets portion of your balance sheet.
If you need to see which customers have un-applied payments posted to their accounts you can run the A/R Aging Detail report under the Customers & Receivables section of the Reports menu. Any un-applied payments will appear as credits (minus) on the report.
In addition, by using this method you can apply the prepayment to any Job associated with this customer by double clicking on the payment in the Customer Center and selecting the invoice(s) to apply it to. All Jobs for a Customer will appear for a payment posted just to the Customer and not to a specific job.
If you wish to post your Customer's prepayments to a liability account that will appear in the liabilities sections of your Balance Sheet you can do this using a Sales Receipt to record this transaction.
Step one is to create an account on your chart of accounts for the liability such as Customer Deposits. Use the Other Current Liability account type when setting this up. Next you will need to create an Item in the Item list to direct to pre-payment to this liability.
From the Item button on the Item list select New. Choose the "Other Charge" Item type.
Enter the appropriate name and description for the item, choose the non-taxable tax code and select the account the you created in the chart of accounts for this liability.
In this way you can record the payment number the payment method, and because you are using a Sales Receipt and not an invoice the funds appear as a balance in the liabilities section of the balance sheet rather than reducing the Accounts Receivable balance on the balance sheet. Once this Sales Receipt is created you can see the transaction on various Customer reports. However, it will not appear in any Accounts Receivable reports.
When you are ready to apply this prepayment to a customer invoice you will need to do a journal entry to move this amount into accounts receivable. Simply debit the Customer Deposits account and credit Accounts Receivable. Include this Customer name in the Customer/Job column of the journal entry. If you use Jobs under your Customer register, the journal entry to credit accounts receivable must be attached to the "Job" (in the Customer/Job column) that is being invoiced.
To apply this prepayment to an invoice, open the invoice by double clicking on it in the Customer Center and click the Apply Credits button. Once the available credit has been selected choose Done.
This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.
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