 QuickBooks Desktop 2024 Customer Pre-Payment 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 the QuickBooks Desktop software so we can practice the new unearned revenue feature within it. Under the view drop-down we have the hide icon bar selected, the open windows selected, open windows open on the left-hand side. In the company drop-down we have the home page open. Now we're going to go to the reports and select the two major financial statement reports like we do every time company and financial. Let's start off with the balance sheet report. I'm going to customize the report up top changing the range from 010127 to 123127 and then go to the fonts and numbers changing the font up to 14 as we do every time. Is that okay? Yes. Okay then. Then we're going to go to the reports drop-down again company and financial. This time the profit and loss the income statement. 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 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. And let's change that range this time the range going from 010127 to 0606327 because we want to see it side by side month by month not the total only in other words but the month by month breakout our first scenario was run in January second scenario in February the third scenario took three months from March to May this next scenario is going to be in June. Let's customize the reports fonts and numbers changing the font size back on up to 14. Is that OK. Yes OK then. All right so then let's go back to the homepage quick recap of what we have done in the past where ran three scenarios so we can do some comparing and contrasting the first one the normal scenario where we don't get a prepayment we just enter the estimate the sales order remembering the sales order would only be there if you're in like the enterprise version. There are both transactions that aren't recording any actual journal entry to the financial statements then we created an invoice and we also went up and created a purchase order in order to receive inventory because we imagined it was for an inventory item and then we received the payment and make the deposit that's the normal process. However we might have an under revenue situation or a customer deposit where we receive the payment first which could come in like two major scenarios one being where we sell a large product in our case it was the psychedelic surfboard where we would want to deposit in advance to us delivering the surfboard to make sure that we're going to receive the payment to lock the customer in to the transaction whether being if we have a subscription model classic subscription models being magazine newspapers more modern subscription models being like online application services in which case we receive the entire payment up front we are we when we recorded these two types of transactions we hit we entered the estimate we entered the sales order but on the customer side we then jump to the receive payment it recording it and the old method that we used to do which is a negative receivable which works pretty well from a bookkeeping standpoint but isn't quite right from a reporting standpoint and that's where the problem lies so this time we're going to we're going to do the new method where when we get to this receive payment we're going to record not a negative receivable not income but rather a liability which will call in this case customer deposit because we're imagining we're in that surfboard situation where we're selling a fairly large or expensive item and we want to get the deposit first before we complete the sale possibly because we have to order like a custom surfboard and then our next scenario will be one where we have the subscription model where we might rename the liability account as unearned revenue okay so let's go through the process if I if I go to the the customer drop down and let's just take a look at what we did before customer center this is where our customers hang out and in the last one when we did the negative AR it looks really nice internally what we did is we made the estimate and then we made the sales order and then on the sales side of things we use the sales order to create or we then created a payment so we received a payment for it and then we created an invoice to finish it off this payment however was recorded as a negative receivable but it looks pretty easy to follow just from a internal bookkeeping perspective to try to just get the facilitate the transactions right so now let's do the new one we're going to go to the homepage let's start with a estimates and we're going to have an estimate and I'm going to call it this time four and this is going to be customer prepayment which is a weird name for a customer but the idea is that I'm going to try to separate everything to this being scenario number four that's going to be our customer name I will quick add it we're going to say it happened on 060127 tab tab tab tab I'm going to make a new item which is going to be by the same name although I'm going to imagine it's that psychedelic surfboard scenario again so someone a customer is in wants to order a surfboard it's going to be an inventory part we don't have it on hand he wants some crazy psychedelic airbrush on it or whatever and we're like okay we're going to have to order it so we're going to order that but we're going to want the down payment first to make sure that this crazy looking guy is actually going to pay us right so we're going to say that the cost let's say is $100 to match the scenario we had before sales price 175 same scenario we had before sales taxes turned on within the system good we're going to set up an account here so this is going to be a new account that we're going to set up set up the account and I'm going to call it an income account let's just call it an income account and I'll call it customer prepayment for the customer prepayment let's say income something like that so I can see a different account so we can again separate our scenarios that we're running so we're going to say okay there it is I'm not going to say any inventory on hand because we will enter a bill at a future point when we order the surfboard so there it is down here $100 the markup is 75 so we're charging 175 $13 is the tax and if I was to record the journal entry there is no journal entry yet because it's just a request form just as we've seen in our prior practice problems let's go ahead and record it and then check it out if I go into my customer center we're going to say there's our customer there's our estimate no impact on the financial statements at as of yet so let's go back to the home page the next step would be estimate we create the sales order this also being an internal form you wouldn't have this possibly if you didn't have like the enterprise version in which case you would go directly from the estimate to the invoice possibly but the sales order we can think of as in essence locking in the customer so this person wants it a surfboard and we're like okay here's the estimate and now they're agreeing to it so we're going to finalize the estimate creating the sales order and then from the sales order we're going to connect to the receive payment however when we go to the receive payment we're then going to turn on the prepayment feature so that we end up with a positive liability instead of a negative receivable alright let's do it customers let's go into the estimate and we're going to create a sales order this is a sales order so so the estimate has been copied to the sales order good that's looks good it's telling us we don't have any inventory on hand which is fine because we're going to use this simply to request and then we'll use this the sales order to to make the bill at a future point as well because we're going to have to do the custom order from the from the vendor for this particular customer that wants this kind of airbrush or whatever so then it says you can tell QuickBooks to block any transactions to what would result in a negative okay so let's do it this is going to be as of 060127 let's say 0602 just so we can have a different one day up and so everything looks good this is pulling in we have the same kind of numbers down here but like with the estimate nothing new was really happening in terms of the financial statements no journal entry right same thing sales order no journal entry happening internal document if I save it and close it we can see then we have the estimate we get the sales order from an internal perspective we can now say the sales orders locked in I'm then going to collect or get the prepayment if that's applicable or we would continue on doing the job or whatever we're going to do from here in our case we want to collect the deposit from the customer so we're going to go into here and I'm going to go to the receive payment to connect it now when I do that it says receive customer payment on sales orders you can now receive prepayments from your customers and add them to your current liability account all you need to do is go to preferences and select prepayment settings so we could go there directly from here and that takes us to the prepayments company preferences if you didn't get that pop up for whatever reason and you or you just want to go there directly edit dropdown preferences and then payments on the left you want the company preferences as opposed to the my preferences if you don't have the prepayments thing on the right hand side you might not have the latest version or the enterprise version they might roll this out you would think possibly to all the desktop versions but if you don't have it you won't see this thing on the right right so if you do then you got the prepayments over here so we'll select that we're going to turn on the prepayments and then it says select a current liability account to record your prepayments as a liability has to be a liability account because that's the point we're collecting something before we earn the revenue we don't want to record this revenue we don't want to record it as a negative receivable we want to record it as a liability usually a current liability so if I select the dropdown let's add a new account and I'm just going to call it customer deposit notice the default is as a current liability type of account we could call it unearned revenue which I might change to and do next time because I think that's more appropriate in a subscription model situation customer deposit seems appropriate in this situation when we're getting an advanced deposit on the work that we're going to basically complete later so I'm going to keep it at that save it the name exists because I was messing with it before I'll put a dot next to it and I'm going to say okay let's do it so there it is and then it's going to close all the windows I think which is annoying yeah quick it's going to ah man quick books now you're going to make me open it okay whatever let's go to the reports and open up all the stuff again balance sheet company financial balance sheet customized going from 010127123127 fonts and the numbers changing it to 14 is that okay it is fine then okay maximize reports drop down company and financial profit and loss change in the range 010127206327 and oh no yeah that's right and then I want to go from total to months and then go to the customized fonts and numbers and change it to 14 to okay yes okay and then company drop down let's open that home page back up alright and so there's our home page so now we went from the estimate to the sales order and now we're trying to create a receive payment but we didn't finish it yet because we had to turn on the prepayment and now we have a liability account to post it to instead of a negative accounts receivable so let's go back to the customer center customer center they're hanging out over there by the water cooler the customers are they're just chilling so we're going to go over here and we're going to say let's go into the sales order again and let's say we're going to receive a payment so now it says you won't be able to make any changes to this prepayment once you apply it to an invoice so be careful if you need to change it then you're going to have to actually delete it I think you can still I believe delete it if you needed to and then do it again but you can't just adjust it so you have to be you know be careful be careful so now this form looks like the other receive payment form but now it has this prepayment thing on it so what is us the form usually do when you have a receive payment or customer payment form it usually decreases accounts receivable that's what we know that form always does this one however does not because it's marked with the prepayment and that means it's going to hit the liability account that we selected which is the customer deposit note down here to that under the last method that we used we didn't have anything down here and therefore when I selected like a $50 deposit there was nothing to apply it to because we didn't have an invoice we still don't have an invoice what we do have is a sales order you don't usually apply a payment to a sales order because the sales order is an internal document but QuickBooks is using that sales order kind of like it's an invoice so that we can apply the payment out to the sales order here so that's kind of how it's how it's working if I go back to my my worksheet on the on this side I can say okay this time we have a receive payment form and what's happening with the receive payment well cash is going to go up because we're getting a deposit and I created this other account called customer deposit now so now we have this customer deposit account that I have added now and that's going to be 50 and negative 50 so if I post that cash is going to go up by 50 this time which is right and then here's the key the customer deposit is going to go up the customer deposit is not revenue because even though we got cash we haven't yet earned it and it's also not a negative receivable because we don't want it because it should be a liability we owe the money back to the customer at this point in time or we owe the customer the work under the old method it was a negative receivable that was kind of the glitch in the system even though it worked well kind of from an internal standpoint from a reporting standpoint external reporting we would typically would need to do an adjusting entry basically to make it correct as of the end of the period so that's going to be it now I'm going to make this a little bit smaller so I can see the record button at the bottom so there's the record button I'm going to save it and I'm going to close it is everything at all wait a sec change the date you're so lucky you fix that because you can't really so this is going to be from 060127 cash okay everything else is good let's save it and close it the payment date should be on or before the sales order date but what was the sales order date on for crying out loud let me close this out let me let me let me close this something has gone horribly horribly wrong the pen I'm going to clear this and then close it so the sales order date says okay it's on 6227 okay so let me let me say I'm going to say receive payment you won't be able to okay I know that and then it's going to be 50 and let's say this happened on 060327 is that okay with you quickbooks is that okay with you alright so $50 let's do it alright let's put this back up to 150 and then we have it so we can close this back out okay so let's so here we have the internal documents look good there's our payment we expect later that we can go and order the surfboard and then enter the invoice that we can apply to the payment if we go to the balance sheet what happened over here we went into undeposited funds instead of into our checking account but it's still kind of like cash I'm not going to get into the undeposited funds thing right now but the other side did not go to a decrease of the of the accounts receivable which it did before because the sub ledger dealt with the customer instead going down here to a liability account that we set up where to go customer deposit there it is so that's great that because now it basically posts it down here properly reporting it from an accounting standpoint however it is still a little bit more confusing because now we have to have two sub ledgers to deal with the customers in other words if I get on my reports up top and I go to my company and financials no my customers and receivables and I look at my what is it customer balance detailed report customer balance and detail then I don't have anything in here for that customer yet because I haven't entered an invoice I entered a payment only so that's kind of fine because it you would think well it shouldn't be there because we don't it's not an AR yet it's not an account receivable related thing but look at the last customer we have this for where we have this payment happen first and then we apply the invoices to it the negative AR is wrong but from just an understanding what's going on side of things a bookkeeping side of things this is pretty clear right it's kind so that's kind of nice whereas when you look at this when you have this other liability account then there's going to be another sub ledger related to the liability accounts not it's not going to be in one place right so so now I've got the customer deposit is also going to have a sub ledger although this is a liability it's tied to the customers whereas usually liability accounts have sub ledgers that are tied to vendors right so now we're going to go into the customers and say this is going to be the where's it there's open prepayments somewhere around here there it is open prepayments so there's our $50 there so that looks so that looks good but it's basically that added step so if we compare this to the last process if I go back to my customer center and think of it from an internal perspective what's the difference between these two processes well internally in here it looks much the same when I'm trying to finalize my transaction I can see what's happening right I made an estimate I made a sales order I've got the payment the payment looks like a prepayment when I make the invoice I should be able to apply the payment to it in a similar way as when we have that negative receivable which we often like call a credit right that we're going to apply to the invoice you can see that over here where the other method internally looked very nice as well same kind of concept estimate we've got the sales order and then we have this $50 payment it's just that this payment was marked as a negative receivable instead of a instead of a positive liability but from this side of things the bookkeeping is pretty similar because then when I make the invoice I could apply the payment out to it so from this internal screen perspective just facilitating the transactions both of these work pretty well so I like that so if you can do that so I kind of like the new thing that works quite well however it does also still lead areas for confusion for people to do funny things so for example if I go to the balance sheet over here like you'll if you have any experience with this undeposited funds you'll note that that's a clearing account it has its use it has its functions it's useful but a lot of people will mess things up because of it it has another step which will mess people up sometimes so anytime you have an added step it could mess people up right the same thing is kind of true with this accounts receivable being broken out now between accounts receivable and then this this other account down here for for the deposits the liability account now I can't find it the liability account for the deposits right there this the fact that we have this other account that's kind of related to receivables adds another level of kind of complexity because now somebody could post something to that account without actually going through the normal kind of process and that would make mess it up right and the sub ledger would could possibly get messed up and when people are trying to figure out what is happening from a reports standpoint related to a customer usually they're going to be looking at things that are related to the accounts receivable so people have to understand that this is a liability account that is still tied to a customer also when we move it when we actually make the payment and enter the invoice quick books is going to create a clearing account to facilitate that transaction which will which will create which will college cause a journal entry to be put in place so again will have another clearing account which is another area where people could could cause havoc right they could post something to that clearing account not as big a problem as this undeposited funds because the clearing account that they're going to put in there is just used for this one purpose but again it creates another transaction just which adds one more kind of complexity into the system as a journal entry and it adds this other clearing account that they could add more to the complexity as well so I'm just trying to point out the pros and cons between the two system it works quite well we don't have to do an adjusting entry at the end of the month this way because you should have the liabilities properly recorded it looks very nice internally into in order to facilitate the transactions from a bookkeeping standpoint but you know the downside is of course that we have these two accounts we've got some clearing accounts we haven't added journal entry which could add some complexity and leave you know room for people to mess something up possibly that's so but we'll continue with this transaction finish it up next time