 QuickBooks Desktop 2024 unearned revenue monthly invoicing. 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 focus in on the new unearned revenue feature. Under the view dropdown we have the hide icon bars selected and the open windows list selected. Open windows open on the left hand side and the company dropdown. We've got the home page open as well. Going to the reports dropdown as we do every time company and financial looking at that balance sheet standard. The balance sheet standard is going to be customized for the date range change. 010127 tab, 123127 tab. Let's go to those fonts, those numbers and change them. Bringing it up to 14 for a little bit more visibility. Is that okay? Yes. All right then. Let's do it. Going to the reports dropdown again. This time company and financial for the profit and loss otherwise known as the P&L. We're going to then change the range 010127. Let's go this time out to, let's go to, I think we're going to 103127. I think that'll be far enough because I want to see this one on a month by month breakout because we've been running our scenarios on a month by month. The current scenario was in June and then we'll do some of the payments going forward. So it'll be a few months out as I see it now. So we're going to customize this fonts and numbers. Let's bring it on up to 14 as well so it matches the balance sheet. We need matching reports. You can't be uneven. You can't have it all crazy unevenness. So there we have it. Let's go back to the homepage and recall what we did last time. We've been thinking about the new unearned revenue feature for a subscription type business with this type scenario. That being a magazine type of business or a newspaper or more likely these days some online software business where we get paid upfront for like an annual service. In our case, we just did five months out because that's, we don't want to take too much of our time here in the example problem to get the concept. So what we did last time is we had an estimate and then we had the sales order. So the sales order and the estimate aren't going to be recording anything from a financial statement perspective, the estimate being an estimate of like a job or whether we want to take the subscription, the sales order basically finalizing that. We didn't have to go up to the vendor side because we're not going to be buying any inventory but we want to get paid upfront in our case for five months of a service like an application we're going to be providing if it was software. So we skipped over to the receive payment. Now normally when we enter a receive payment and would be the case under the old method under the negative receivable method this would then create a negative receivable because we don't have an invoice to tie it out to but under the new method we basically tied out the receive payment to the sales order which is strange from a financial reporting purpose because the sales order doesn't record anything to the financial statements but it's a nice tool internally to then record the receive payment. 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 CPA six pack shirts a must have for any pool or beach time mixing money with muscle always sure to attract attention. Even if you're not a CPA you need this shirt so you can like pull in that iconic CPA six pack stomach muscle vibe man you know that CPA six pack everyone envisions in their mind when they think CPA you know as a CPA I actually and unusually don't have tremendous abs however I was blessed with a whole lot of belly hair allowing me to sculpt the hair into a nice CPA six pack like shape which is highly attractive yeah maybe the shirt will help you generate some belly hair too and if it does make sure to let me know maybe I'll try wearing it on my head and yes I know six pack isn't spelled right but three letters is more efficient than four so I trimmed it down a bit okay it's an improvement. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com not to a negative receivable but rather to a positive liability now we did that for five months of our service that's going to be whatever our subscription is software let's say and then each month that passes we can now create the invoice the invoice now recording the revenue as we earn it as time passes and reducing the liability of the of the unearned revenue that's the classic journal entry notice the other thing that we kind of want to see however is this information on the back end in the sub ledgers which we usually see in the sub ledger related to the accounts receivable which is a reason I think that our QuickBooks uses a journal entry which will be an added thing so let's go to the balance sheet and check it out here just so we can see what's going on here's the AR if I go to the reports to see the report related to the AR customers and receivable let's go to that customer balance detail report and let's customize it so it's a little bit larger a little bit larger if we could fonts and numbers let's bring it up to 12 14 is a little too big for this one let's go on up to 12 now notice this new one isn't here yet because we didn't do anything for the receivable side instead we created the new liability account which is down here under the liabilities unearned revenue so there's going to be a separate report now related to unearned revenue for a liability even though it's a customer which is usually tied out to an asset of accounts receivable so if I go to the customers in receivable and I look at the open prepayments by customer we can customize that report we can bring it up to 12 let's say okay okay okay so there it is the whole amount is in there as of this point in time two sub-ludgers a little bit more complicated but on the plus side there's going to be a liability as opposed to an asset if I go into the company drop down or customers drop down and we go into the customer center where our customers hang out we see that here we're working on this five unearned revenue and we called from last time everything looks pretty much the same as the old method from an internal bookkeeping standpoint and the internal bookkeeping if you used a negative receivable was quite fine because you can facilitate the transactions quite clearly in here here's the estimate then we have the sales order and now the payment the only difference is when I go into this payment here it's a fancy payment because payment usually means it's decreasing the accounts receivable but it's not here because it says prepayment which means it's going to be doing something to the unearned revenue being tied not to an invoice but a sales order so it's a little bit tricky but if that's your business model because all of your stuff is subscription based then you know that'll become fairly clear you might not even use the other payment format in any case so if I go to this other one this negative AR same kind of concept we have the estimate we have the sales order and then the payment but this payment was a normal payment without that added little tag which meant that it made a negative receivable instead of a positive liability but from an internal perspective looks pretty much the same and so if I go up top the next thing that's going to happen is we want to make the invoices as time passes so a month has passed we've done whatever we're supposed to do subscription model let's go into the sales order and the beauty of breaking out our sales order for five separate months is that now we can create invoices from it so let's create an invoice but I want to create the invoice for selected items not the entire thing so I'm going to go to this one and say and then I'm just going to say one month has passed and so let's just do that first month has passed boom and so there it is let's tab it out this is going to go into 080127 let's say and so one month has now passed for the invoice what is this going to do it's an invoice so you would think it would increase the accounts receivable and then the other side is going to go to income for the 35 increase accounts receivable 3771 35 going to income and the 271 going to the payable but remember that we had that unearned revenue there as well so the invoice we would like to actually decrease the unearned revenue but the invoice is usually tied to the accounts receivable so you see the problem with these sub ledgers so QuickBooks is going to create another clear account to facilitate this transaction so let's see it over here if I say now we're going to create the invoice what would typically happen normally what happens is accounts receivable goes up but this is kind of the weird one right here because now you would think it's not how we have it in a liability account so you would think that the unearned revenue here could be going down by that amount right so that's where but we're still going to say accounts receivable is going to go up because we're going to do another journal entry to kind of compensate for it so this is what's actually happening so we're going to say the accounts receivable is going to go up and then we're going to have the sales is going to go up the sales is going to go up because we said it was I think equals 175 divided by five months and I'll make that negative so for that amount and then we have the sales tax payable which we're going to imagine we have to deal with just to make things more complicated which was at 0.0775 so this equals this times 0.0775 and then the receivable would be this let's say negative sum of that right so 0.071 0.071 so if I record that now the accounts receivable is going to go up by that 0.3771 income is going to go up by the 35 and that liability of sales tax is going up but note that this shouldn't really be going up to accounts receivable what should be happening instead is it should be going to unearned revenue down but the invoice form usually goes to accounts receivable right so what's going to happen is we're going to end up with another journal entry to do that instead of just fixing it right here we're going to do another journal entry that's going to be saying okay let's take the unearned revenue down and then accounts receivable is going to go back down and then we'll be able to see it in the sub ledger the accounts receivable is going up by that I'm sorry accounts receivable unearned revenue and then accounts receivable so if I record this now accounts receivable is going to go back down that's the wrong one sorry and it's going to go back down and then unearned revenue is going to go down on the credit side leaving us with the five months receivable needed so then even looking at that I've kind of added another journal entry so that I can get my sub ledgers to work and then QuickBooks actually adds another basically clearing account and doing this journal entry so that's where you get a little bit more messiness happening over here so let's record it and see what happens so I'm going to say save it and close it yeah let's do it this customer has available credits now I should have applied this out already but I'm going to say ok yes apply out the credit so here's the credit credits available prepayments so it's a similar process as if I had a negative receivable but now I've got these three boxes so I'm going to apply out the prepayments 73 71 of the total 188 because that's the amount of the invoice let's say done and then ok I think that's good hopefully that's good and if I go back into the invoice we can see now that the payment has been applied out that payment isn't changing the journal entry it's just an information information so that I can give this to the client if we needed to the journal entry would still be affected by that 37 on the accounts receivable or decreasing under revenue there's going to be a journal entry increase to sales 35 and this to 71 now if you wanted to apply that out before you record it I think you can still have going to apply credits up top we'll test that out again next time for the next month let's go ahead and close it and check it out if I go to the balance sheet and let's see what's what's happening what's happening over in balance area we're going to say then there's the invoice for the 37 71 see even though it's down to zero here it's still up going for the 37 71 the invoice increase in the accounts receivable even though it's not like decreasing the liability of under revenue it's going to happen basically with the journal entry over there so then the other side is going to go to the profit and loss the P in the L so profit and loss in August there's the 35 just for the revenue side and then back to the balance sheet we also have then the the liability of the sales tax the sales tax where there it is I see it you don't have to point it out to me I can find it myself so there it is and then if we go into the under revenue here's the under revenue what happened there because it went down if I go into it and then I'm going to say okay let's look at the date up top to bring it back and so there's the journal entry now notice what it did here it put the journal entry in as of the day that QuickBooks thinks it is right now because because we're working in the future so that's why the date is messed up but let's look at it conceptually right now we're going to say okay what it did is it then took the amount out of revenue with a journal entry and if I go into that journal entry I could change the date let's actually do that I'm going to say let's change the date here to make it what was it 07 07 let's just say 1527 let's say and then I'm going to say okay record it you can't edit the journal entry as it's linked to a prepayment okay whatever I'm going to close this okay I don't want to do it restore it then if you're going to be like that okay so then in any case the other side we went to was this this account for prepayment transfer which is a clearing account so now you've got kind of another clearing account that's in the middle here so I'm going to close that out and then if I go back on up to the accounts receivable up top accounts receivable we're going to say then let's bring this back to 26 so to make sure I see the whole thing here and wow there's a lot going on in 26 let's try filtering it I'm going to customize the report filters and I'm going to filter by type transaction type so we'll go down here and say we want to filter by there it is transaction type and then by journal I want to see the journal okay so there we have our journal and again I put it in there on 1215 but there's the transaction the 3771 and it's trying to put that in the date that it thinks it is at this point in time so there we have that and the other side once again if I go in there is going to it's going to be going to that clearing account I believe so if I go into the journal entry so accounts receivable account for prepayment transfer so I'm going to close this back out close this back out close this back out so we see that there if I look at my customer balance detail I can see now there's my customer so see I can see why they would want to do that to use the accounts receivable which would be this added step right here right which would be putting the invoice into accounts receivable instead of going to unearned revenue and then doing this transaction right here so that you can see it going in and out of accounts receivable so that you have the sub ledger record here notice what you don't see in here as you did with the negative receivable with the negative receivable it's actually easier to see because now you have the payment which is negative and then the invoice is applied out to show the amount of the invoice that has not yet still been applied out see so even though this is wrong that it's a negative receivable it's actually kind of easier to see then up here then up here right that's kind of one of the problems with these with the sub ledgers and if I go into the sub ledger for the open prepayments you can see now here's where you have the detail right so on the unearned revenue there's the 188.56 and then it went down by that 37.71 we do have this issue with the date which probably wouldn't be an issue if you were working in real time but I can see that could cause you problems if you can't change that date if you're going back and trying to fix something or something like that because it's locked in so let's do it and if I go internally if I go into my customer center internally it looks pretty straight forward because now we still have the estimate to the sales order and then the payment and then the invoice being applied out looks great but then again we have these two journal entries down and again I would think maybe the reason they wanted two journal entries and a clearing account is that you can see them both down here so in other words why do they need a clearing account instead of just doing this right they added another journal entry in there which you wouldn't need from a debit and credit standpoint I think it has something to do of course with the sub ledgers and to be able to track this information out internally so you can see those two journal entries net out it's bothersome to look at it looks less clean than over here this method where you don't have those journal entries we have these three payments that were tied out but it's not too bad because they knit out against each other also if I go to my lists drop down and I go into my chart of accounts and I look at my include inactive accounts here's that clearing account that they set up the account for so if I go into that there you have the transfers and again the thing that's kind of annoying is it's not allowing me when it makes that journal entry to change the date that date is being tied into the current date that the transactions happening rather than the date that we made the invoice which seems kind of weird to me I would think that would be a kind of an issue I don't think that's exact but it is right now so they might change I think they might change that because I think that feel like that's something's wrong with that but in case if I go back to usually we would be working in real time right so that's how it would be so let's go back to the customer center and we could do this again so let's imagine another month passes and we go back into the sales order and we're like okay now let's make another invoice just for the selected items the second one so boom boom boom just that one okay and so this is going to happen on 09 uh 0901 whatever 2-7 so and so this is going to do the same thing so if I look at the journal entry we're just going to do the same thing again this is the second invoice invoice let's say this was month one month one and month and this is going to be month invoice invoice voice month two and so then once we'd have the same journal entry accounts receivable for the same amount 3771 income sales tax same thing same oh same oh 35 and I'm going to say we'll just say this is the same thing negative sum of that and then so if I record that bit then we've got the accounts receivable going up which is the controversial thing here because really under and revenue should be going down from just a debit and credit standpoint but we'll add another journal entry to fix that and then income is going up for the next month that has passed and then sales tax the liability is going to go up and then we're going to add another journal entry to fix the fact that the accounts receivable it should have decreased under and revenue so I'm going to say under and revenue is going to be debited and then the A to the R is going to be credited so that allows it to go in and out of the sub ledger for accounts receivable for the 71 3771 3770 fund double clicking the unearned rev and picking up that so now I've got five I think we have five months four three months left in there and then accounts receivable goes back down accounts receivable going up and down makes sense because then you would be able to see it going in and out on the sub ledger at that time although again they add another account over here when they do it so what's this going to do that'll increase the accounts receivable 3771 the other side is going to go to income 35 and then sales tax for the amount of 901 then it's going to make that journal entry to decrease the unearned to decrease the liability and the other side going to accounts receivable which you would think would be happening on 91 but it seems to be doing that not at the date of the invoice but at the date of the current day it thinks it is which is kind of an issue let's save it and close it and check it out so the customer has available credits credits would you like to apply those credits I'm going to say yes again so I'm going to apply the credit out here so we're going to apply the credit so there it is is there anything I can change with the date date 9127 so here's the date 73 so we're applying out that 37 prepayment ok I'm going to say ok once you apply the available prepayment you won't be able to we'll create a journal entry for this transaction do not display this page I'm going to say ok so now when you're in there I'm going to say invoice it applied out the prepayment and so it says it's paid that looks good and we could have applied it out by saying apply prepayment I don't see any way to change the date of the journal entry as we do the transaction though that's kind of an issue or it could be if you're not working in real time or if you need to go back and if you're working in real time that isn't going to be an issue but I would think they would tie the journal entry date to the date of the invoice not the current date that the software thinks it's at I'm thinking they might pick up on that at some point and fix that because I would think that would be the case unless I'm missing something but this would work if you're doing it in real time it wouldn't be an issue if we weren't working in the future so in any case if I go back on over here and I go into the A to the R we see the invoice going up 3771 we see the other side going to the P and the L the profit and the loss so now in September there's the 35 that looks good the other side the sales tax going into the liability account sales tax payable sales tax payable that looks and then we have the liability account going down this added journal entry to do the liability account going down so where's that of my unearned revenue you did not earn that revenue you did not earn that revenue but see the dates are messed up here see which is annoying I'm a little frustrated by that so then they're going but it's going down you can see the process and again if we were in real time it's picking up the current date and it won't let me change it to what would it be I would think this should be happening as the invoice date which I said was what 090127 090127 it's doing all this stuff down here save it and close it you can't do it so annoying annoying so I feel like they should adjust the date to the journal entry date but maybe they'll pick up on that or maybe I'm missing something so but in any case the transaction makes sense and then it's going to go up top to then the accounts receivable if I go to the AR and so the other side would be in here if I brought the date back and then that looks good and then if I go into my customer balance detail report we can see it going in and out to the receivable that's the point of this added journal entry in my estimation so you can see it going in and out of accounts receivable cutting accounts receivable out entirely so it's in the detail report but if you go to the customer the customer where's the balance detail the customer center where's the other report the customer's receivable customer prepayment report now you see the detail here the start and it's decreasing by those two leaving in here the customer balance detail we see the customer center so now we can see this one and again it gets quite convoluted with all these journal entries because you're going to get two journal entries every time an invoice happens let's do one more just to round it out to what we did in the last problem sales order one more time I didn't hear no bell I only stopped doing stuff when I hear a bell because that means food is happening usually we're going to create an invoice for selected items and then we'll uncheck those one more month and then I think I'm on what month are we on does anybody know October October invoice 10 0127 and so this is going to do the same thing let's run the journal entry over here do it fast because people are getting bored invoice month 3 I don't know why we even have to do this one after what you need to do another one we have to make it match we have to make it match what we did in the other problem so I'll just copy these down and so this is going to be the AR same journal entry same thing and then accounts receivable is going to go up on the A to the R the income double clicking on it it's going to go up and then the sales tax it's going to go up and then we've got this stuff is in the AR we're going to take it out of the AR so now it went in and out of the AR so we can see it in the sub ledger and then the unearned revenue is going down boom so I think that's right I think we did that right let's see that's what should happen over here so it should increase the accounts receivable by 3771 because it's an invoice other side should go to the income should have sales tax payable 271 but it shouldn't have gone to AR it should have gone to decrease the liability so it's going to make another journal entry taking it out of the liability account and netting it out against the AR but give us a weird date before I forget let's apply the credit out this way the changes to this transaction so I'm going to save the changes there I can apply it out that way so there it is and there's no way I can change to stop with this weird thing do that with the journal entry I don't see how to do it and then won't let me do that MUI enterisante okay let's go ahead and save it and close it and check it out if we if we could go into the balance sheet one more time we're going to say that the A to the AR has the 3771 the other side going to the P the L the income statement for October there's the 35 there then back to the balance sheet back to the basics and the balance sheet we're going down to the sales tax payable sales tax payable right there double clicking on it it's been impacted and then we know there's a decrease to the liability account the liability account the revenue down to the 75 is that what I have here 7542 it is indeed what I have but they did the crazy date thing because it's doing the journal entries as of that date there's the journal it's also taking it in and out of the clearing account and the other side would go to the AR on the balance sheet which we won't check out because again it's going to be hidden in the prior and then the sub ledger for my customer balance detail we can see it going in and out with the journal entry and then the invoices again the journal entries having the date issue which I think should be tied to the invoice date as far as I can tell and then but we at least see the detail conceptually that looks good from that standpoint open prepayments we can see the activity here and the detail in here which looks good although the journal entry is not exactly specific and again the dates are kind of an issue but we're working in the future so that is what it is customer center over here looks everything looks pretty clear for all the stuff that makes that we're concentrating in on from a bookkeeping standpoint except that we have all these other journal entries that are going to cloud things up in here so that's kind of annoying but from a bookkeeping standpoint we would be saying I'm just going to ignore the journal entries because that's just the weird bookkeeping stuff or weird quick book stuff and I'm just going to focus on this and that stuff is following as it should so if I compare this process to this process with the negative AR looks very similar in the forms that we're actually dealing with although the negative AR doesn't have all those journal entries doesn't have two sub ledgers when you're looking at the balance sheet for the sub ledgers doesn't have a clearing account and it doesn't have this extra journal entry in and of itself right here and it doesn't have the added clearing account that QuickBooks is putting in to do that and it doesn't show those transactions down here which I'll add some room for problems to happen so again it works pretty good there's no way to eliminate all those added little intricacies that I can see so that's some of the pros and cons or if I go back to the chart of the accounts lists chart of the accounts it's going in and out of this account which you can only see if it was include active sale so it made it inactive, QuickBooks did so that you don't see the detail of it going in and out of here but there it is and so it put them all in as of 1215 because that's what QuickBooks is seeing as the current date so those are kind of the pros and cons if we're looking at it from the subscription model side of things so we've kind of went over it in terms of a deposit type of format pros and cons between the two methods and with the subscription