Tag Archives: Deposit

QuickBooks Online (QBO) – offset a deposit received

A deposit received is a payment for goods and services which yet to deliver. It’s liabilities. The balances are cumulative presents in the Balance Sheet. It has to offset against the invoice when goods and services have fulfilled at a later stage.

All the balances in the Balance Sheet have to transfer over when the accounting system changed. And that includes the deposit received from various customers.

Let’s assume that you have decided to move your business accounts to the cloud and adopted QuickBooks Online (QBO) accounting system.

You can use the general journal to transfer the balances from the Balance Sheet to the QuickBooks Online. Set the date of the journal as the crossover date, and then debit the opening balance equity and credit the deposit received account when transferring the deposits over to the new system.

Receive payment in QuickBooks Online (QBO)

Issue an invoice when goods and services have fulfilled on the following financial year. Then, use a journal to transfer the deposit, which paid by the customer in the previous year, to the receivable account. It reduces the amount owed by the debtor when the journal credits the accounts receivable.

Offset the journal with the outstanding invoice when payment received.

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Refund a deposit paid

Software: MoneyWorks accounting software

A deposit received is a part payment from the customer to the business for goods and service which not yet fulfilled.

A deposit received from a customer (current liabilities) can process from a sales order or record via a sales invoice. A receipt recorded automatically into MoneyWorks once deposit processed from the sales order; both methods credit the deposit account. A refund can process via a payment transaction but has to first enable the customer as a creditor or cash only supplier (from the name profile).

Another method which commonly used by small businesses is creating a full invoice with all the products and services sold for collecting partial payment from the customer. In this case, a credit memo has to record to offset partially with the sales invoice and then use the ‘Send Refund to Debtor’ feature to record a payment for the balanced credit amount.

Assuming you issue a sales invoice of $100,000 to a customer for goods and services which you are going to deliver within the same financial month, and the customer made a partial payment of $10,000. You cannot use a payment method to refund the deposit paid as what we have discussed earlier when the order has cancelled.

There are still an outstanding of 90,000 after the deposit of 10,000 has collected. A credit memo of 100,000 has to record to offset against the outstanding receivable. Then, use the ‘Send Refund to Debtor’ feature from the command menu to clear off the 10,000 credit balance.

Send Refund to Debtor

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Advances received from a foreign currency customer

Software: MoneyWorks accounting software

You cannot use the overpayment method on a foreign currency customer; you get a warning message ‘Receipt amount exceeds amounts allocated to invoices’ when trying to apply overpayment. Use credit note method instead if you are not using the order system.

Warning message

First, issue a sales invoice to the foreign currency customer with the ‘advances received’ account, which is a current liability account type, if your customer required an invoice to arrange payment. This invoice debits the foreign currency accounts receivable and credit advances received.

Assuming you issue a sales invoice to a foreign currency customer demanding for an advance payment of US$10,000 at an exchange rate of 1SGD:0.73USD (We will use this rate for the whole case study). This invoice

Debit USD accounts receivable 10,000
Debit USD accounts receivable~~DEL 3,698.63

Credit Advances Received 10,000
Credit Advances Received 3,698.63

Offset the sales invoice via a receipt when the customer paid; you cannot use the overpayment method but to offset the invoice completely (assuming full payment received). This receipt debit the USD bank and credit USD accounts receivable.

You can record a receipt for the advances without first creating a sales invoice if your business policy is not having advances invoice for the customer, it will debit the bank and credit advance received.

Then, use a credit note to reclassify the advances received to the accounts receivable if you prefer to view it or track from the ageing report, or when there are multiple advances received without a proper schedule.

Issue a credit note to the customer with the advances received account and enter ‘advance received’ (or something similar) at the transaction description field; it helps to differentiate from the other credit note which you may see in the ageing report.

Credit Note

The credit note (assuming same exchange rate used)

Debit Advances Received 10,000
Debit Advances Received 3,698.63

Credit USD Accounts Receivable 10,000
Credit USD Accounts Receivable~~DEL 3,698.63

Ageing report.png

Amend the ‘Type’ column formula of the statement, if you require to send statement to the customer, from:
If(Type = “DI@”, if(Gross >= 0,”Invoice”, “Credit”), if(Type = “CR@”, “Receipt”, “”))

If(Type = “DI@”, if(Gross >= 0,”Invoice”, if (Gross < 0 and Transaction.Description = “@Advances”, “Adv Rec”, “Credit”)), if(Type = “CR@”, “Receipt”, “”))

This formula prints the advances received (a credit note transaction) in the statement as ‘Adv Rec’ instead of ‘Credit’ to help reduce confusion.


You may consider engaging a MoneyWorks consultant in your area if you are having trouble customising the template.

Record a product/service invoice once you are ready to ship the goods or perform the services. The invoice (assuming goods valued at US$10,000, which is same as the advances received)

Debit USD Accounts Receivable 10,000
Debit USD Accounts Receivable~~DEL 3,698.63

Credit Sales 10,000
Credit Sales 3,698.63

You can then do a receipt to offset the product invoice and the credit note when received the payment from the customer (if the value of the product invoice is higher than the advances received), or offset the credit note with the product invoice with the contra feature from the Command menu.



1. Sales Invoice for demanding advances.

Debit Accounts Receivable
Credit Advances Received

2. Receipt. Receive payment for above invoice (1).

Debit Bank
Credit Accounts Receivable

3. Credit Note. Create a credit note to reverse the advances received to accounts receivable.

Debit Advance Received
Credit Accounts Receivable

4. Sales Invoice. Issue a sales invoice for the products/services which you sell to the customer.

Debit Accounts Receivable
Credit Sales

5. Receipt/ Contra. You can either contra or use a receipt to offset the Credit Note against the Sales Invoice (4).

6. Receipt. Do a receipt for the balance payment received from the customer for invoice (4).

Debit Bank
Credit Accounts Receivable


Note: There might be balances in the ‘advance received’ account if the exchange rate used in advances invoice and credit note (reverse of advances) is different. In this case, you have to pass a journal to transfer the balances from the advances received to the exchange gain/loss account.