 QuickBooks Desktop 2024 Unearned Revenue Estimate Sales Order Receive Payment Forms. 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 using the enterprise version of QuickBooks Desktop so we can practice using the new Unearned Revenue feature. First, a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers, they don't want to be seen with us, but that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our crunching numbers is my cardio product line. Now, I'm not saying that subscribing to this channel, crunching numbers with us, will make you thin, fit, and healthy or anything. However, it does seem like it worked for her, just saying. So, subscribe, hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Under the view drop down, we have the hide icon bar selected, the open windows list selected, open windows open on the left hand side. Under the company drop down, we have the home page open. Under the reports, we're going to look at the two major financial statement reports under company and financial like we do every time starting with the balance sheet report. Let's go to the customization, changing the ranging from 010127 tab, 123127 tab, fonts and numbers. I'm going to bring that font on up to 14 like we do every time. Okay, yes, okay then. Then we're going to go to the reports drop down again, company and financial, this time the P, the L, the profit, the loss, the income statement, changing that range. This time though from 010127 tab, 06327 and tab. Then I'm going to look at this on a month by month breakout, not the totals, but on a month by month. Then let's go to the customize reports up top. We're going to customize and let's go to the fonts and numbers, changing and bringing that up to 14. Okay, yes, and okay. Let's actually go out one more month out to July. So I'm going to go 07 3127 at the end date. So we've been running our scenarios and kind of a side by side, month by month type of breakout. We first started with a scenario where we didn't have any prepayment. Then we ran a scenario where we had a deposit on a large purchase like a surfboard in our example. And we had a negative receivable, the old method. And then we ran a scenario with the negative receivable subscription type of model for a magazine, or a newspaper or a computer subscription model. And then we used the new feature. First looking at a scenario where we have like the big deposit on a surfboard. Now we're going to look at the subscription scenario with the new feature not having a negative receivable, but rather having a positive liability. Let's look at that over here on the homepage. So we're imagining now that we sell something like newspapers, or we sell a subscription model for our software, for example. In that case, what happens is we're going to get the money first, we're going to receive the payment before we invoice. So to properly record it, we shouldn't be recording revenue when we get paid, but rather when we do the work. So this is the classic example in most book problems for unearned revenue, in which case we're going to get paid for say like a year's worth of subscription, let's say. And then as the time passes, we should take it out of the liability account, which we're going to put it in when we get paid and remove it from a liability account to a revenue account. Now, what usually generally happens is we're going to make the estimate, we might not make an estimate in this kind of model of a situation with a subscription, but we'll do the same starting point. We'll make the estimate, we'll lock people into the estimate with the sales order. These are non transaction, non financial transaction forms. And then from this point, instead of creating the invoice, which would record revenue, we're going to jump on over basically to the receive payment, because we're going to get paid before we record the invoice, because the invoice records the revenue. Now the receive payment would traditionally usually make a negative receivable if we don't have an invoice to tie it out to. But now we're going to make a positive unearned revenue with the new feature being turned on to allow us to put it into the negative revenue account. And then we can create invoices. Basically, we're thinking like on a monthly basis to write down the unearned revenue and record the sales as they happen. So that's going to be the process. If I go down to the customer dropdown, we go to the customer center, we ran a similar scenario, which I think was scenario number four here, where we had a similar process. But this was with the negative receivable. So we made an estimate, we made a sales order, and then we collected the payment all upfront that payment created a negative receivable. And then we made invoices to apply out to the payment as time passes. So internally from this page, this process is pretty nice from a bookkeeping standpoint, although not exactly correct from a financial reporting standpoint, because if I go to my balance sheet, until we pay it off, we're going to have that negative receivable in the client. Let me show you in a customer report reports dropdown, we're going to go into customers and receivables. And let's look at the customer balance detail. So we looked at let's make it a little bit larger. Let's go just to 12 this time, we're not going to go crazy to all the way up to 14 with this one, because it's kind of a long report or wide report, let's make it to 12 though. And then so we had this one here, where we had that payment first, and then these are being applied to it. So notice it's a negative number, which is not correct, because it should be a positive liability, not a negative receivable. But from just a sub ledger perspective, it's quite easy to see in this format. So now we're going to do the other format, where we're going to create a liability account. So as long as it's negative, it shouldn't be showing up in the customer side or the sub ledger for accounts receivable, but rather for some other sub ledger that we will set up. All right, so let's do that. We're going to go to the homepage. First, let's make an estimate. So we'll do a same starting point, the same starting point estimate. And I'm going to call it then a similar name that we were calling the ones before. So we can remember it's going to be five, I'm going to call it unearned revenue customer, which is a weird name for a customer. But the point is, I'm trying to remember the scenario that we're running here. So we're going to say QuickBooks, add it, boom, boom. And this is going to be as of 070127. Tab, tab, tab, tab. I'm going to make a new item by a similar name. And we're going to make multiple items down here. And this is a method that might be used for a subscription type of model, which will make it easier for maker to make our invoices monthly. So I'm going to say, let's put this in here. And I'm going to say, QuickBooks did not find so I'm going to set it up. And I'm going to make this time a service item. I'm going to imagine it's not an inventory thing that we have to track. It's just going to be a service subscription of some kind. And so I'm going to say this is going to be item unearned revenue. And I'm going to put at the end month one month one. And I'm going to copy that. And we'll just do five months. So I'm going to say, okay, because I think that's what we did before. So I'll put that here. And then I'm going to pull out the trustee calculator. And I think we said before it was we were doing 175 is what we've been charging divided by five. That gets us $35. So let's charge it out at $35 a month. And then we're going to say it's going to go to my new accounts. I'm going to say it's going to be a five unearned revenue account, which is going to be a new income account allowing us or helping us to track what we're doing setting it up. So it's going to be the account name. I said five account name unearned revenue month one. That's what I wanted to say. Okay, save it. There it is. So I think that's right. Okay, let's save it. And then I'm going to do this again. And this time I'm going to copy and paste the same thing but month two. So I'm going to make a new item for five months. So tab, same thing, same setup service item, month number two, $35. It's going into five unearned revenue, same thing, but month number two service item. So I'm going to say, okay, this will help us populate it to the purchase order and then to the invoice. So I'm going to say, okay, and let's do it again. Two more times. It's tedious, but this is tedious. I don't like this repetitive. No, this is good practice. Tab, we're going to say yes. And service item down here number three, $35, $35, number five, number five tab. And we'll save that one. And then we'll do it ultra base. Those more times, two more times, those moss. We're going to say yes. And then tab and then down here, this is going to be 35 number five. And then one more time, one more time, number five, copy that. I'm going to copy that bam. Yes, and service number five, 35, and number five. Okay, so there we have it. And let's save it. So now it's going to add up to that total of 188.56, which I think is the total we've been working with with our prior practice problem models. But now it's broken out on a month by month breakout. So I'm going to say, all right, this isn't going to record anything. So what's this going to do from a from a journal entry standpoint, nothing, just like our other transaction, our prior practice problems over here, nothing's happening. You know, try to get a full screen. All right, so nothing's happening thus far. Let's save it and close it, we can check it out. And my customer ballot not there and the customer center, where my customers hang out, they're over here, I have every all dates selected. And there's my estimate has been made. So the next thing that we would do we had our we had our estimate, we're going to go to the sales order, you would only have a sales order here if you were in like in the enterprise version generally, if you didn't have a sales order, you would go basically from the estimate, possibly if you're collecting the deposit to the receipt payment, but we're going to make the sales order also an internal document. So I'm going to go to the customer center. And I would go into the estimate and say, okay, they finalize that one. So let's make a sales order from it. And it says the estimate has been copied to the sales order. Great, movie B to the end BN. And so there it is, let's make this as of 070207 0702 27. And everything's been pulled in here. Once again, nothing's happening from a journal entry standpoint, what's happening nada, nothing. It's just basically an internal documentation. And so we're going to go. So let's save it and close it. And so now we've got the sales order and the estimate. So sales order and estimate. So if I go to my home page, sales order estimate, we don't have to go up to get inventory, we don't have any inventory. Instead, we're going to get the payment. We could record an invoice. But if we did so, then we would be courting, we would be recording the revenue at this point when we received it. But we haven't actually delivered the software, the newspaper, or the magazine or whatever we're supposed to give them. Therefore, we're going to go to this receipt payment. And this usually creates a negative receivable like we saw in the last scenario. But this time, we turned on the preferences to make it do the new thing, unearned revenue positive liability account. How did we do that? Edit dropdown, preferences, preferences down here. And then we went into the payments and company preferences. If you don't have this thing over here, then you might not have access to the prepayments, but it should be here if you have access to it. And then it would say receive customer prepayments on sales order, prepayment settings. Let's go into the prepayment settings. We turned it on with this button, record prepayment as a liability. We selected the liability account. I'd like to select a different liability account this time, because I'm going to call it unearned revenue with this scenario as opposed to customer deposit. Because that was usually the terminology you do with a subscription model. So I'm going to say a new one. Let's call it unearned revenue. You didn't earn that revenue. You didn't earn that revenue. Save it. Save it. Okay. And then we're going to say okay. And then we can then go back to our customer center, customer center. And I can make I usually would make it from the sales order go into the receive payment. So we're in the sales order. We're going to go to the receive payments. And if you didn't have it turned on already, then and you have access to that feature, QuickBooks might ask you to turn on the feature because it's saying hey, you're doing something funny, you're going out of order. So you won't be able to make the change to this prepayment once you apply it to an invoice. So we have to be careful. We might be able to still delete it, but we can't change it once we do it. So we're going to be careful. Be careful. Looks like the same payment form, which usually decreases accounts receivable, but it's different because it says prepayment, which means it's not going to decrease the accounts receivable. But rather, it's going to be increasing the liability that we assigned, in this case, that being unearned revenue down here, you usually have invoices that we're going to apply the payment to. But this time, we don't have an invoice because we didn't make the invoice yet, because we haven't earned the revenue yet. But it still has something down here because it's pulling in the sales order. That's the new thing. That's how QuickBooks is tying this stuff together. So let's say that we're going to be collecting then the whole thing. And how much was it? 188.56, because it's a subscription model. So we're going to get this upfront right here, right now. That's when we're going to get it. And we're going to say this is going to happen on 0703.27. And this is clicked off down here. So what's this going to do from a journal entry standpoint? Let's check it out. We're going to say from a journal entry standpoint, cash is going to go up. It's going to go into unearned revenue, but we're just going to call it cash here for the amount of how much was it. It was with the sales tax included 188.56. So let's wait, this needs to go over here. Cash 188.56. So this is the receive, receive prepayment. I'm going to try to call it something different because this is the receive payment form. But you have this prepayment little button over there that makes it different because it's not going to increase the accounts receivable, but the liability instead, the liability is now going to be called. Let's just change the name. It's not going to be customer deposit. We're going to call it unearned revenue. You're not entitled to that revenue yet. You think it's, you think you're entitled to it, but no, you didn't do, you haven't done the work. You haven't done the work to be entitled to that revenue. Okay. So we're going to put it in here into a liability account until you do, until you do have, have done what you need to do to bring it on down from unearned revenue into the income. We do that with the invoice. So if I go back on over here, let's record it on this side. I can't do it because I can't see the button. So I'm going to say, let's bring the size of the screen down to 125 and then I can see the button, save it and close it. And hopefully I did that right because you can't change it. It said remember, and then I'll make it super sized again and close it out. And so there we have it in the internal documentation. And let's see what happens over here. We're going to go then to the balance sheet and it went into unearned revenue or undeposited funds. So I get those confused sometimes because they have the un in front of them, but there it is undeposited funds. And the other side did not go into a negative receivable, but rather should be going into a liability account, which we are now calling unearned revenue, unearned revenue. So there we have it. So that looks movie B to the end. If I double click on that, we get into our payment closing that out looks good. So that's the differentiating factor here. So last time it went into the negative receivable. Now if I look at that from a reporting standpoint, it actually is a little bit more confusing because because usually when I'm looking at my customers, if I want to look at the reports, I would look at a sub ledger for accounts receivable, like we did over here. If I go to my my customer balance information, remember, this is this the similar scenario we did with a negative receivable before where we would see the negative amount and then the payment supply to it. When I look at this new one, it's not here. It's not here at all. But we have another sub ledger for the open prepayments. So if I go to the customer drop down, and we go to the customers and receivables, we've got this customer prepayment report. Boom. And there it is right there. So we have this added report, which makes it a little bit more confusing. But you know, but on the plus side, it's recording it properly from a financial reporting perspective. Internally, if I go to the customer balance or the customer center, it looks pretty much the same internally. So if I'm trying to manage this and just manage it from an internal perspective, which you would normally do over here from the bookkeeping side of things, it looks pretty much the same, right? We made the estimate, we did the sales order, and now we have the prepayment. Whereas this scenario, we did the similar process, we had the estimate, we had the sales order, and we had the payment. And the only difference is that this payment now is now posting, it was posted to negative accounts receivable, now it's posting to the unearned revenue. But like on a bookkeeping side, I might not even be looking at the reports, right? I'm kind of looking in here to just to see what's happening. And from that perspective, these two things are running the same, pretty much the same process thus far. Now, the next step does add a little bit more complexity. So the pros here being that thus far, it looks pretty, the process is pretty much the same. And the benefit is that now when I look at my reports, I don't have to do an adjusting journal entry for those negative receivables at the end of the month for external reporting. I already have it posted properly into a liability account, as should be the case. That's great. From the cons perspective, it's a little bit more confusing when I look at the reports because now I have two subledgers, and I have to look at a liability account to see the subledgers. And I'm adding a level of complexity where people can mess things up because they might post something to unearned revenue instead of to revenue or something. I have another account that could cause people problems. And I have two kind of forms that look like a received payment form that are basically different, one of the received payment forms being for deposit versus the other received payment form that can cause a little bit of confusion. And then when we finish this off, they're going to have to pull in this amount that's in the unearned revenue. Where did it go? They're going to have to pull that in and net it against the receivable, which is going to cause a journal entry and another clearing account. So it does add some levels of complexity to the system. But it works pretty well. I mean, there's no way to kind of get around that. I'm not trying to say this, but that's the kind of the pros and cons. So the prior method still might be appropriate for basically smaller companies or companies that are comfortable doing that adjusting entry at the end of the period. It still works pretty good. The new method though is looking pretty similar from a bookkeeping standpoint, but it has a couple of those things that do add a bit more complexity just from the internal bookkeeping side of things. So we'll continue on and finish this out next time.