 QuickBooks Desktop 2024 Negative AR Customer Pre-Payment Deposit Estimate Sales Order Receive Payment Get ready and some coffee because we're locking into some non-stop QuickBooks Desktop 2024 First, a word from our sponsor 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 Accounting Rocks product line If you're not crunching cords using Excel, you're doing it wrong A must-have product because the fact as everyone knows of accounting being one of the highest forms of artistic expression Means accountants have a requirement, the obligation, a duty to share the tools necessary to properly channel the creative muse And the muse, she rarely speaks more clearly than through the beautiful symmetry of spreadsheets So get the shirt because the creative muse, she could use a new pair of shoes If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com Here we are in our QuickBooks Desktop sample company file. We set up in a prior presentation using the enterprise version of the QuickBooks Desktop software So we can practice with the new unearned revenue feature within it Under the view tab settings, we have the hide icon bar selected, open windows selected so we can see the open windows on the left hand side Home page open, you can open it by going to the company dropdown and home page Opening up the major two reports like we do every time by going to the reports dropdown, company and financial Let's start with that balance sheet standard report and change that date to 123127 And then I will customize it to make it a little bit bigger, fonts and the numbers changing that font size up to 14 Okay, yes and okay Then reports dropdown again, company and financial, this time the P&L, the profit and loss, the income statement Changing the date range from 010127 I'm just going to go out to 022827 this time for two months So then I can select the dropdown here and see it by a month by month breakout And then I'm going to go to the customize reports, fonts and numbers, font change, change font to 14 Okay, yes and okay So last time we ran the normal scenario where we can see here we ended up with the $75 of the net income Now we're going to run the second scenario in February so we'll see it broken out in February Back to the home tab So last time we just did the normal cycle meaning we started with an estimate, had no transaction recorded for it And then we went to the sales order which kind of locks into the estimate We imagined that we were selling a psychedelic custom surfboard So we had to then have a custom order We created a purchase order for the vendor that we were going to buy the custom surfboard for And then we entered the bill and then the sales order was used to create the invoice Once we have the surfboard and could actually sell it and then we went to the received payment So now we're going to go to a similar process But this time we're going to say that, hey, this guy's creating this psychedelic Why does he want a psychedelic surfboard? This guy's kind of weird Do I trust that this guy's going to pay me? I don't know So maybe before I order the surfboard then I ask for a deposit to lock this thing in Because I don't want to be stuck with this crazy psychedelic surfboard if no one's going to buy it Because we're going to lock in a deposit at this sales order point So let's look at it from the standpoint of our Excel worksheet So within Excel, this was what we did last time And these three points, the estimate, the sales order, the purchase order, and no transactions related to that Then we entered a bill to get the inventory, then an invoice, and then we received the payment Let's copy this over, I'm going to double click on this tab I'm going to call it 1135 this time And I'm just going to delete everything in blue And I'm going to delete everything in this middle bit right here Delete the middle bit These two, maybe these shouldn't be blue I just want it on the data input side of things Let's unblueify that Unblueify And unblueify it over here too So that everything is properly there Okay, everything needs to be represented well Okay, so then let's go back on over So we're going to do the same thing starting with an estimate Starting with an estimate This time I'm going to call it another two And I'm going to call it a negative AR prepayment customer I know that's a weird customer name But the idea is that we're going to try to keep everything separate So it's related to this practice Quick add to the customer And we're going to say the date here sometime in February 020127 Tab tab tab tab The item, same thing Two negative AR prepayment item We're going to set up a new item in other words Tab And we're going to order the psychedelic surfboard We're going to call it an inventory part And I'm going to say that this is going to be Same name down here Item And then we're going to say cost 100 I'll make it the same as the last one that we did 100 cost to get sold was here And then 175 is what we sold it for 175, that's what we did last time Am I right? Could you help me out here? I forget I forget sometimes Okay, I think it's good And then tax will be applied So let's go ahead and do that Income account, I'm going to make a new income account Just so we could separate it Income this time is going to be Income And with that same name Number two, AR, negative AR Setting up It's going to be an income type of account Negative AR I'm not going to put an account number That'll make it even easier to find We're not going to put any inventory on the books yet Because we're going to use this to make the purchase order too So we're going to say okay And there it is So this looks like it should record something But we know from last time it doesn't We're just telling the person That wants the psychedelic surfboard That's how much it would cost If you were to do that So if I was to record it and go into my Customer center up top Now I could say okay There's my new customer There's my estimate I can mail out the estimate to the customer I can look at my reports Estimates and whatnot If I so choose And so on Just like we did last time If I was to look at it in terms of journal entries Same thing up top We have an estimate No transaction happening At that point Same, same, same Then we're going to go back on over And say okay Now they say he's locked in He's going to order that We want you to give us a down payment Right? So we're going to say alright We'll make a sales order And we want a down payment at this point in time And he's like okay dude I've got the money And so we're like alright So then we want number two And then This is going to be as of 020127 Tab, tab, tab We don't have any purchase order to tie out to In this case So we're just going to say okay And then we're going to say The purchase order would be If someone was ordering Like ordering from us With the purchase order to another business For example but we're saying this is the end customer So then the item is going to be The two Oh no And it says I don't have any of those on hand That's okay because I'm not giving it to them right now I'm going to make a bill for it shortly So I'm going to say okay That's cool So there's my sales order Now the sales order is not going to record anything Again But it's kind of like making the Estimate solidified now This is the step that you might not see If you haven't used the enterprise version And you might have just gone from the estimate To the receipt payment Of the sales order but this time We're going to say that we've recorded here Now the new step is We could go to the receipt payment Turn on the prepayments from here And then And then use that to record the prepayment Which would record it hopefully to a liability Rather than a negative receivable But I'm going to first do the old method Where we have a negative receivable To compare and contrast And then we'll do the new method here So I'm not going to make The receipt payment from it I'm just going to record this I'm going to say save it and close it It happens on the customer center Over here now we've got the sales order Sales order is good to go If I go back on over here Once again nothing happened For the sales order nothing happened So nothing happened With that one So then Before I get the Before I order the inventory from my vendor I'm like you need to pay me Let's say $50 So I'm going to do the old method Is I'm going to go to the receive payment Before We enter the invoice And without the turning on of the new The new feature Of the liability account Of like unearned revenue Now again If you don't have the ability To turn on the new thing Because possibly you have an older version Or something like that Then this would be the method that you might use And even if you do have the option To turn contrast some of the differences Between the two You might still not want to turn it on Because it might cause more confusion And it does add a clearing account and what not So we'll talk about that We're comparing the two So again I'm going to say this is number two There's our customer name And we don't have an invoice To tie out to down here Because we haven't made an invoice yet We're going to collect the payment first So the payment is going to be let's say This guy we should... It'll be fine This guy will pay us 020127 And let's say we get cashed down There's nothing to tie it out to So when I record this what's it going to do Well the customer prepayment Usually Will decrease the accounts receivable But there's nothing in accounts receivable So it's going to make a negative accounts receivable That's wrong What should it do instead Why do we want it to create a negative receivable Because it's easier to make a sub ledger For the negative receivable That's the point So it's kind of easier From the bookkeeping side So this is where we have something different happening here So we have the sales Receipt I'm not sure if I spelled that right What's going to happen We're going to say we get cash I'm going to put it into cash instead of undeposited funds It might go into undeposited funds But the other side is going to go to The accounts receivable Like so And then cash Where's my decimals up here Why does everything else have decimals but not this one It's crazy It's making me crazy With the inconsistency So we have Now we end up with this negative receivable So again that's not quite right Because it should be down here As a liability account Not a negative receivable But when I try to track the sub ledger It's easier to track a sub ledger To one account Than two accounts That's the trade off that we're Trying to deal with here So let's go ahead and record it Check it out over here So we'll save it We'll close it It says a credit for the overpayment Will remain on the customer's account You can click print credit memo Click ok to save the transaction Click cancel So I'm going to say ok and boom Recorded Let's see what happened then back to the report So we're going to go to the balance sheet And we know that we put We put money into undeposited funds I'm not going to get into making the deposit from there But it's going into basically A cash account 010127 And so there's the $50 payment That looks good Ok closing that out The other side is going into Negative Accounts receivable AR010127 That's going to be The payment there's the $50 It doesn't make it negative Here because we had a bunch of stuff In it already But when I look at the sub ledger By customer It'll be negative for the sub ledger So if I close this out Reports drop down and we go into Receivables and we say We want the customer balance Detail let's say You can see here Now we have this AR for this customer Has a negative balance Well what does it mean If there's a negative AR For that particular customer That means that they owe us That means that we owe them money We owe them money That's a liability So it should be a liability but Basically it fits into the AR sub ledger Because we want it to be connected To the customer that's basically the problem On the internal bookkeeping side What happens if I go To the customer center over here And I look at this Am I and I'm trying to see What's going on with this customer It looks reasonable over here Because I'm like ok what happened Well there was an estimate And then a sales order and then a payment But that payment isn't tied out Right and it I can then tie it out in the future When I make the invoice And so it looks Easy internally From an internal standpoint as well So From a bookkeeping standpoint This actually works fairly well For the sub ledger The problem is from reporting standpoints When I report this for financial reporting I have my AR is too low and my Liabilities Are too low So what we would need to do is do an Adjusting entry possibly at the end of the year To properly adjust The accounts receivable and the liability And that system Can work fairly well As long as you know what you're doing You can be A lot of small companies Particularly to mid size companies Can basically work around that kind of system And make the Internal bookkeeping Basically as easy as possible That would be kind of the focus Of that kind of system So also just note that after We're after we've completed This whole process Then it will be correct And it's just a timing difference So if I go into my customer balance Over here that negative amount Once I actually Do the work And give the surfboard enter the invoice These two things will net out And it will be positive again And will be back in business Also just realize that if I go to the bottom of this report It ties out to what's on the balance sheet Hopefully This is at $92,957.93 Balance sheet $92,957.93 So that's I mean again that's the key We have to have the sub ledger tying in To the accounts receivable Is too low by that negative Amount But if you break it out into a liability account Then It becomes a little bit difficult to tie the sub ledger out So what are we going to do We're going to have two sub ledger Kind of accounts That's basically what's going to happen We're going to have two kind of reports on the sub ledger account That will tie out to a liability And to the accounts receivable So that adds a little bit of complication To it There's pros and cons to the methods But we will continue with this next time And next time of course What we will do is we will Complete the purchase of the inventory Then we'll turn around And invoice the customer And then we'll see if we can receive The payment from the customer