Tag Archives: QuickBooks

How to record retention in QuickBooks?

Retention is money withheld by the customer of a contract (project); protect the customer against incomplete or defective works. The retained sum is usually released to the supplier once the project ends or after the warranty period.

Assuming the sum withheld is at every stage of the progress claim. For a progress claim of $100,000 with 5% retention, the journal behind the sales invoice will be:

DR. Accounts Receivable $101,650
DR. Retention Receivable $5,000
CR. Sales $100,000
CR. GST Payable: $6,650

To record the retention in QuickBooks Online, first, you create a retention item (can be a service item) and link it to the retention receivable (a current assets account). Then, use it in the invoice with a negative value to reduce the invoice total (the objective is to reduce the receivable and not the revenue).

To view the retention receivable, you may run a report for the retention receivable account (from the Chart of Accounts) and group it by the customer to check the retained sum by the customer or for a job (if you are using the project feature in QuickBooks Online).

QuickBooks Retention Report
Retention – Quick Report

You may then issue an invoice to the customer for the retained sum once the project ends. The journal for the invoice:

DR. Accounts Receivable $5350
CR. Retention Receivable $5000
CR. GST Payable $350

QuickBooks Online is a small business account system suitable for small businesses and SOHO. Although it does not have a complex project accounting feature, it should be sufficient for basic project tracking.

Note:

  1. The letter of claim is not a tax invoice, and the retained amount has to account for the GST upon payment received or invoice issued, whichever earlier.
  2. To create an account in QuickBooks Online (QBO):
    • Click on the Gear icon and select Chart of Account from the list.
    • Click on the New button in the Chart of Account list to add an account.
  3. To create an item in QuickBooks (QBO):
    • Click on the Gear icon and select Products and Services.
    • Click on the New button in the Products and Services list to add an item.

How to create a Credit Note in QuickBooks?

Software: QuickBooks Desktop accounting

Credit Note is a document issued from the seller to the buyer for goods returned or credit for overstated in sales value.

QuickBooks Credit Memo

For QuickBooks Desktop accounting, the Credit Memo (a.k.a. Credit Note) is under the Customers menu (Create Credit Memo/Refund). Credit Memo is using the same sequential number as the Sales Invoice. For example, if the last sales invoice number is 1234, then the next Credit Memo number is 1235. Some accountant may like to have a unique sequential number for the Credit Memo, such as using a prefix to tag the Credit Memo (CN2001, CN2002, etc.); by doing so, the following Sales Invoice number will continue from the Credit Memo saved. For example, if the Credit Memo is CN2002, then the next Sales Invoice will continue as CN2003, you have to change the invoice number manually to keep it consistent.

QuickBooks Discount and Credit

Similar to the Sales Invoice, you cannot use a General Ledger account directly in Credit Memo. Consider creating an Other Charge item and associate it to the relevant income account from the item list and use it in Credit Memo if the credit is not about goods returned. You do not need to enter a negative value for the credit amount, QuickBooks will credit the accounts receivable and debit the relevant income or inventory account automatically. You have an option of retaining it as a credit to offset against future invoices, give a refund, or offset with the existing outstanding invoice when the Credit Memo saved.

QuickBooks is a simple, easy to use accounting system for small businesses; it has both Cloud-based (QBO – QuickBooks Online) and a Desktop version for those who prefer to keep their accounts locally. Sign up a free QuickBooks demo to find more on how to use QuickBooks to manage your business finance.

Invoice in multiple currencies

Software: QuickBooks Desktop Accounting Software

You can record bill or issue invoice in foreign currency once you have set up to use the multiple currencies feature in QuickBooks.

A currency has to tag to each name set up in QuickBooks. For example, you tag USD to Customer A if you trade with him in USD and invoices issued will link to the USD Accounts Receivable account automatically.

QuickBooks - Multiple Currencies

Multiple Customer A has to be created if you are trading with him in multiple currencies. For example, you create two names in Customer Centre if Customer A buys from you in both USD and MYR. One set as USD and another in MYR. QuickBooks treats them as a separate entity and will both show in the receivable report separately.