 QuickBooks Desktop 2024 negative accounts receivable subscription unearned revenue monthly invoicing and revenue recognition. Get ready and some coffee because we're locking into some non-stop QuickBooks Desktop 2024. Here we are in our QuickBooks Desktop sample company file. We set up in a prior presentation looking at the enterprise version of the QuickBooks Desktop software so we can practice using the new unearned revenue feature within it. In the view drop down we have the hide icon bar selected, open windows list selected, open windows on the left hand side, company drop down we have the home page open. Let's go to the reports opening our major financial statement reports as we do every time. Reports and company and financial starting off with the balance sheet standard customize the report change the range 010 127 tap 1231 27 january to december 2027 fonts and numbers i'm going to bring that font on up to 14 like we do every time okay yes please and okay dropping down the reports again company and financial this time the p the l the profit the loss the income statement changing the range but i only want three months out this time so from 010 127 tap 12 not 12 03 31 27 three months out that's what we agreed upon so then we're going to say that this is total only no we want month by month breaking it out month by month for scenario by scenario here customize in the report so we can see it better and the uh screen recordings fonts and numbers change in the font on up to 14 again okay yes okay there's the setup process we do every time let's go back to the home page and we're comparing scenarios here on how we can deal with this unearned revenue situation so we started with a normal scenario we had an estimate we make the estimate into a sales order if you don't have the enterprise version you might not have a sales order but it's kind of just like locking in the estimate and then in a normal process we might simply go to the invoice at that point we possibly also might need to buy inventory in some cases in which case we can buy inventory but on the sale side the next step would be the invoice we receive the payment then we make a deposit but what if we want to get the deposit first two scenarios will run in first scenario we have a big sale of something and we get a deposit like on our surfboard the psychedelic surfboard that we sold and we wanted to get a down payment because we had to order the custom surfboard and we want to make sure that someone is committed to it so that we can make the order in that case we made an estimate we made a sales order and then we jumped over to the receive payment and there's two ways we can think about receiving that received payment the old way using a negative ar which still has its pros and cons and or the new way which would be linking it to the unearned revenue which is the new thing which we'll talk about later we've practiced the old way the negative ar then we entered the invoice which maps out the ar as well bringing us back into our normal spot once we get the psychedelic surfboard and then we had to receive payment and and we're good to go and we end it off or we can have a subscription model which is the model we're focused on this time in which case we might have this the same estimate we might make the sales order but then we're going to go to the receive payment here not have to deal with inventory possibly but receive like a year's worth of money up front and that's just our normal model like a newspaper model or a magazine model or an online application model some kind of subscription service type of model so the way we should recognize the revenue then is by not recording the invoice when we get the money because we haven't earned it at that point in time we should put it into unearned revenue or liability but under the old method we could still use the negative receivable in that case if we wanted to that's what we're practicing this time and then we'll compare it to the new method so this time we have this negative receivable that we put in place so we're imagining we sell some kind of subscription a newspaper or something like that last time we did the estimate we did the sales order and then we received the payment in our case we're saying five months of payment up front and then now we're going to have to invoice the client and that's what we're going to be doing this time okay so let's recap the process so if I go into the customers drop down customers and the customer center then on the left hand side we named our customer the third because this is the third scenario that we ran we first made the estimate here's the estimate opening that up and notice to what we did here which is different than the deposit scenario we actually made a different item for each line item of a monthly payment which might make it a little bit easier when we're trying to tie that out and recognize the revenue because we broke it out into revenue recognition chunks of monthly chunks that we can pull over to the invoices so I'm going to close this back out we converted that then nothing was recorded from that that was an internal document that we're tracking then we had the the sales order that we created from the estimate looks very much the same here that we have on the sales order pulling it out also internal document and then we've created the payment which is the pre payment and we note that when we got the payment usually it's linked to an invoice but it's not in this case resulting in this negative accounts receivable for this customer of the 188 56 if I look at that from a journal entry standpoint the journal entry is over here then we have the estimate the sales order the sales receipt this is the only one that had an actual transaction if that was the only thing in our books it would increase cash and the other side's not going to revenue and not on the income statement because we have not yet earned it it should be going to an to a liability account but it's not we're doing the old method that it's in the accounts receivable as a negative receivable which will not necessarily convert your whole receivable to negative as it's doing here because you'll have other receivables in there possibly but that for that one client it's basically a negative receivable and technically that would be wrong for reporting purposes but it's pretty easy to track from an internal bookkeeping purpose because now we only have one sub ledger tying out to this accounts receivable that's like the pros and cons of it if I just to check that out again if I close this out and I go to my balance sheet over here then we can go to the AR so here's the AR if I look at the sub report of that reports drop down and we go down to the customers and receivables and take a look at the AR balance detailed report let's say so there's our AR see how it's in there as a negative for that particular client let's customize it and make it larger fonts and numbers so it's a little just go 12 this time let's not go crazy with the 14 just bringing it up to 12 so there's the negative AR now now note that my total AR is not negative right so if I go down here it's it's still 92 8 19 on the positive because I have other AR in there that's positive but but it should be then if I go back to my balance sheet it's and it ties in over here that's the point the sub ledger ties in that's the good thing the bad thing is the AR is is understated and we should be breaking it out for a liability but it's a timing difference and so that's this that's the pros and cons okay so now if I go back to the homepage what's the next step well in this case we we did the estimate we did the sales order and then we did the receipt payment now when unlike the deposit scenario with the psychedelic surfboard we don't need to collect anymore we've collected all that we're going to collect until the next round of of the next year or in our case five months of payment so what we're going to do is now just periodically monthly as we do the work