Tag Archives: Deposit

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”, “”))

to:
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.

Statement

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.

Receipt.png

Summary:

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.

 

Receive deposit for the order (overpayment method)

MoneyWorks accounting system has a receive deposit for order feature built-in the orders systems (on both Sales Order and Purchase Order system); you have an option to process a receipt from the Sales Order system when a deposit has collected, or a payment transaction once a deposit has paid for the purchase order. Unlike the Purchase Order system, which allows generating a Prepayment Invoice, Sales Order only has processes for ‘Receive deposit for order’ and ‘Ship goods with invoice’. That is, MoneyWorks generates a receipt when you process ‘Receive deposit for order’ from a Sales Order, and a Sales Invoice recorded when ‘Ship goods with invoice’ has processed.

Therefore, you have to issue a Sales Invoice separately to the customer when demanding a deposit for the order, it debits the Accounts Receivable and crediting the Deposit Received from the Customer account (which is a current liability account). Then, do a receipt with overpayment method when payment received.

How does the overpayment method work?

Assuming you are required to issue a Sales Invoice to a GST registered customer to demand $10,000 deposit for a $30,000 worth of goods ordered.

Setting:
Add a ‘Deposit received from the customer’ account, which is a current liability account type, to the account list. Then, create a deposit item if you are using product item in invoices. In the product window, link the ‘Deposit received from the customer’ account to the income field of the product to allow it to use in Sales Invoice transaction.

deposit item

Step 1: Sales Invoice
Record a sales invoice for the deposit of $10,000 (use the deposit item which you have created or use the ‘Deposit received from the customer account if you are not using the product feature in MoneyWorks). The invoice debits the accounts receivable 10,7000, credit deposit received from the customer 10,000 and credit 700 to the GST received (output) account.

Deposit for order invoice.png

Step 2: Receipt
Do not apply the deposit collected to any Sales Invoice when recording the Receipt, leave the receipt as an overpayment so to keep it in the ageing report.

Overpayment

Although no invoices have offset, the receipt still debits the Bank 10,700 and credits the accounts receivable 10,7000.

The Statement of Account shows both the Sales Invoice and Receipt from the customer with a statement balance zero.

Statement with overpayment

Besides, the invoice and receipt, the overpayment, shown in the ageing report.

Ageing with overpayment

Step 3: Sales Invoice
The deposit amount which you have invoiced earlier has to deduct from the final invoice (can be after the last detail item). The invoice debit 10,000 to the deposit received from the customer account, debit accounts receivable 21,400, credit Sales 30,000 and credit GST received (output) 1,400.

Sales Invoice

Ageing with final invoice.png

Step 4: Receipt (contra)
The accounting system will prompt to apply the ‘surplus’ when an overpayment is detected. Click ‘Use Previous Surplus’ button when prompted and enter the amount applied to the invoice in the following window.

Apply surplus to invoice

Allocate surplus

Step 5: Receipt
After the surplus applied to the invoice, MoneyWorks will bring you back to the Receipt which you intended to record. Then, enter 21,400 in the amount received, assuming the customer has settled the outstanding in full, and offset it against the invoices listed.

Receive payment

The statement of account shows all the invoices and receipt.

Statement - final.png

 

Ledgers:

Deposit received from the customer

Credit Invoice (Step 1): 10,000

Debit Invoice (Step 3): 10,000

 

Accounts Receivable

Debit Invoice (Step 1): 10,700

Credit Receipt (Step 2): 10,700

Debit Invoice (Step 3): 21,400

Credit Receipt (Step 5) 21,400

 

GST Received (Output tax)

Credit Invoice (Step 1): 700
Credit Invoice (Step 3): 1,400

 

Bank

Debit Receipt (Step 2): 10,700
Debit Receipt (Step 5): 21,400

 

Sales

Credit Invoice (Step 3): 30,000

 

Note:
1. Click here for the advances paid to the supplier.

2. Click here for the advances received from a foreign currency customer.

3. This method does not require to process a ‘Receive deposit for order’ from the Sales Order if you are using the Order system since a receipt (step 2) has already recorded into the MoneyWorks accounting system.

 

How do the “Balance Due” field works in the QuickBooks accounting software?

Software: Intuit #QuickBooks #accounting software

The “Balance Due” in the Sales Invoice is referring to an outstanding amount of a sales invoice after knocking off the payment received. It is useful for project-based business to show the balance due of a sales invoice when an advance payment has collected.

The Balance Due in QuickBooks accounting software

You can use the Make Deposit or a General Journal in QuickBooks to record an advance payment received from the customer. The journal of the transaction debits the Bank account and credit the Refundable Deposit Received account (an Other Current Liability account type).

If you are a Singapore GST register trader, you may have to issue a Sales Receipt to record an advance payment received with GST from the customer. If the deposit is a part payment, GST applied. If you are not sure in GST management, it is better to consult your accountant first before you record the entry.

When the Sales Invoice issued, it will debit the Accounts Receivable and credit the Sales account. Then, you pass a journal or use an Adjustment Note to reverse the refundable deposit received, which you have recorded earlier. You credit the Accounts Receivable and debit the Refundable Deposit Received account. This General Journal will contra off the refundable deposit that you have received and reduce the outstanding amount of the customer. Next, knock off the General Journal with the Sales Invoice, this process is to tag the payment to the invoice. The outstanding amount of the invoice will be captured in the Balance Due field, which you have inserted in the invoice form.

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